The Challenger Ltd (ASX: CGF) share price is under the spotlight and the Elanor Investors Group (ASX: ENN) share price has soared 15% after announcing a property deal.
Challenger is Australia’s largest annuity provider, while Elanor is a funds management business focused on real estate assets.
Challenger’s real estate deal
The two businesses have entered into an agreement with Elanor to form a strategic real estate partnership. Elanor will become Challenger’s commercial real estate partner in Australia and New Zealand, and Challenger will become Elanor’s exclusive distribution partner.
As part of the agreement, Challenger will sell its real estate business to Elanor for total consideration of $42 million, which will be received in new shares issued by Elanor. After completion of the deal, Challenger’s holding in Elanor will be approximately 18% of total Elanor’s shares on issue. This could benefit the Challenger share price if Elanor shares do well over time.
The transaction will involve new investment management agreements between Challenger Life and Challenger’s real estate third party clients with Elanor, representing $3.4 billion of funds under management (FUM).
Challenger’s multi-affiliate business, Fidante, will distribute Elanor’s existing and new funds.
Is this a long-term arrangement?
Challenger said that the transaction supports Challenger’s strategy to expand its funds management offering by leveraging the combination of Fidante’s market leading distribution capability and Elanor’s real estate platform to create a new Fidante affiliate manager that offers a very compelling proposition for retail, high net worth and institutional customers.
Representing the strategic nature of the partnership, Challenger intends to be a long-term Elanor securityholder and will work with management to support growth of the business, which will include a Challenger representative joining the Elanor board.
Final thoughts on the partnership
Both businesses must think this makes sense. For Challenger it could mean that the company is simplified, while it could also mean that Elanor benefits from the scale and the Challenger partnership. However, the Challenger share price has fallen over 1%.
It seems like a good move, though I’m not sure I would call either of them a buy at the current prices.
