NZX is pleased to announce the acquisition of leading New Zealand superannuation and passive funds manager SuperLife, positioning NZX strongly in the growing retirement savings market and enabling the launch of new financial products by NZX’s Smartshares business.
With more than $1.27 billion of funds under management and 41,000 members, SuperLife is one of New Zealand’s largest specialist financial services providers of superannuation, KiwiSaver and managed investments products.
NZX has for some time been exploring options to grow the scale of its passive funds management business and funds administration capabilities, and SuperLife’s passive approach and customer base makes the business an excellent strategic fit with NZX’s existing Smartshares business.
Combined, the NZX funds management business will become the country’s leading passive funds manager and provider of Exchange Traded Funds (ETFs) and will build on both businesses’ investment approaches and proven track records.
NZX intends to manage the combined funds management business separately from its capital markets business. A search for a CEO for the combined business is now underway. As part of the acquisition, SuperLife’s directors, Michael Chamberlain and Owen Nash will continue on as directors of SuperLife, and Mr Chamberlain will join NZX’s management team.
NZX CEO Tim Bennett commented: “This acquisition is driven by our view that there is a clear opportunity in the market for a low cost, passive funds provider which has credibility and scale.”
Pipeline of new ETFs
The SuperLife acquisition is the catalyst for Smartshares to further develop the ETFs market in New Zealand. Smartshares intends to launch a broad range of domestic and international debt and equity ETFs in the next 12 months.
“We expect that the creation of a vibrant exchange traded funds business in New Zealand will ultimately increase liquidity and interest in the market, and provide greater choice and cost effective diversification for investors,” Mr Bennett commented.
“We believe it would be extremely difficult to unlock the strategic benefits of growing the ETF market in New Zealand in a timely and cost effective manner without acquiring or merging with a passive manager such as SuperLife.”
“The combined SuperLife and Smartshares funds management business has strong growth prospects given the expected growth in KiwiSaver funds under management, and the increasing attractiveness to New Zealanders of low cost passive funds.”
“From an investment perspective, SuperLife has at its core a strong, passive approach and is one of the few New Zealand managers to embrace this. We expect a significant shift towards passive investment in the years ahead which is already evident in Australia and other international markets.”
"I look forward to welcoming Michael Chamberlain and Owen Nash and their team, who have built a terrific business over the past 15 years, to the NZX team and to working together to take the combined businesses to the next level."
For SuperLife and Smartshares customers it will remain business as usual. There will be no changes to the services provided, to the customer services staff, and most importantly, there will be no changes to the guiding principles or investment approaches.
SuperLife Director and Founder Michael Chamberlain commented: “This is a great opportunity for the SuperLife team to join with the NZX team, to enhance our current service offerings to members and to enable us to continue to be a leader and innovator in the New Zealand funds management, superannuation and KiwiSaver industry.”
Purchase consideration
The purchase consideration will be an initial payment of $20 million funded through $10 million of bank debt and issuance of $10 million of NZX shares to the vendors which are subject to disposal restrictions. Further payments of up to $15 million are based on retention and growth of the funds under management over a three year period. These further payments, if targets are achieved, will be $5 million of NZX shares and up to $10 million in cash.
NZX expects the completion date for the SuperLife transaction, which is conditional on normal pre-closing matters, to be mid-January 2015. NZX expects the transaction will be earnings and EPS accretive over the 2015 financial year.
NZX will provide a full update on the acquisition and future growth plans at NZX’s full year results announcement in February 2015
Other information
In the context of the issues of shares pursuant to the SuperLife transaction, NZX wishes to provide the following update on the current status of the following contingent liability items in NZX's last published financial statements:
Ralec Litigation – Litigation with the Ralec parties remains ongoing with no substantive change to status. A trial date is not expected before the end of 2015. Prior to trial, NZX expects to be pursuing or subject to a number of interlocutory matters.
Tax – Communications continue with the IRD in respect of Notices Of Proposed Adjustments relating to historical items for which NZX has estimated that the tax effect may be up to approximately $1.3 million. The outcome as to timing of resolution, liability and quantum remain uncertain. However, NZX may take a provision in the financial statements relating to the current financial year for an amount yet to be determined.