Commonwealth Bank of Australia (ASX: CBA) is selling Colonial First State Global Asset Management (CFSGAM) for $4.13 billion to Japanese business MUTB.
CFSGAM is a global investment management business with offices around the world, it manages $213 billion of money for investors. MUTB is the Mitsubishi UFJ Trust and Banking Corporation (MUTB), it has $912 billion of assets under management (AUM).
The CFSGAM sale
According to an ASX update, MUTB approached CommBank about buying CFSGAM after the Australian bank said it wanted to de-merge its wealth management and mortgage broking businesses in light of the Royal Commission.
The cash sale price of $4.13 billion is a multiple of 17.5x CFSGAM’s pro-forma net profit of $236 million in FY18. CommBank estimated that this would result in a post-tax gain of around $1.5 billion, including $100 million of transaction costs.
CBA CEO Matt Comyn said: “Today’s announcement represents another important milestone in CBA’s strategy to focus on its core banking businesses and to create a simpler, better bank. The sale of CFSGAM to MUTB represents significant value for CBA shareholders and is a positive for clients and employees.”
However, the deal is subject to a number of regulatory approvals because of the global nature and licensed entities it operates in Japan, Hong Kong, the UK, the US and Singapore.
The transaction is expected to complete by the middle of the 2019 calendar year. If the deal goes through it should add $2.9 billion of CET1 capital, adding a pro-forma 0.6% uplift to the CET1 ratio on an APRA basis at 30 June 2018.
MUTB CEO Mikio Ikegaya was happy about the acquisition, saying: “We are delighted that CFSGAM, a highly distinguished, diverse and growing asset manager, is joining our group.
Australia’s largest bank still plans to de-merge its wealth management & mortgage broking businesses, it just won’t include CFSGAM.
The Commonwealth Bank share price is down 12% over the past year according to Google Finance.
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