This issue has been raised by others to me. There are arguments for and against acquiring AEF.
For: massive growth potential on a 10+ year growth outlook with annual growth rates between 20-40% in that time.
Share price suppressed by staff increases and some necessary fee reductions. Maybe if staff recruitment shackles are cast off this year then the SP will push up. However, I feel they will reduce fees more to slow the rate of SP increase. So, if I was in IOOF I would atttempt to buy within a 12-24 month time frame, after these steep spending missions have abated. Should also coincide with smaller reductions in fees.
To buy AEF they may get away with a bit over $200M now, maybe $250-300M in 2019. If they offered about $200 a share now, it just wouldn’t be enough to entice me. There’s way too much growth potential to accept a 50% sweetener. The shares grow at that pace every year. Need a bigger offer to get me hooked. By the time you get the deal done and either get cash and/or script you tend to be no better off, especially if you consider any tax liability that may occur.
Other positives are the likely high capital appreciation that IOOF will return after ten years from the deal. There are efficiency benefits....many of the staff that PV has just employed are likely to be made redundant plus others. IOOF might have even greater ability to promote the ethical product via their more extensive networks.
Against: lot of founding shareholders that could block any bid unless the superior offer is made, e.g.none of these pathetic 50% increased bids for reasons I’ve stated above. Is AEF too small a fish to gobble up. A $3B company offering $300M, or one tenth the size. At least digesting such a small company, you can have the ability to offer more as the prey is not that big. If they don’t make a move in a few years then AEF will grow much faster than IOOF and the relative easy of acquiring its target dismisses rather quickly.
AEF Price at posting:
$131.20 Sentiment: None Disclosure: Held
