NZX to spend up to $35 mln for fund manager SuperLife

Monday 8th December 2014

NZX, the stock market operator, will spend up to $35 million buying fund manager and KiwiSaver provider SuperLife as part of a plan to launch a series of new exchange traded fund in the coming year.

The Wellington based company will pay $20 million up front for SuperLife, of which $10 million will be in cash and $10 million in shares, which it expects to complete in mid January, NZX said in a statement. It will pay a further $15 million over the next three years if the business hits retention and growth of funds under management targets, of which $5 million will be in shares and $10 million in cash. The acquisition, which adds $1.27 billion of funds under management and 41,000 members, is expected to add to earnings over the 2015 financial year, and was prompted by NZX's plans to launch a series of domestic and international debt and equity ETFs in the next 12 months.

NZX will roll the SuperLife business into its $400 million Smartshares unit, and manage the merged entity separately from the capital markets business. It's looking for a chief executive, and SuperLife directors Michael Chamberlain and Owen Nash will stay on as directors of the fund manager, with Chamberlain joining the NZX management team.

"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," chief executive Tim Bennett said. "The combined SuperLife and Smartshares fund management business has strong growth prospects given the expected growth in KiwiSaver funds under management, and the increasing attractiveness of New Zealanders to low cost passive funds."

KiwiSaver was set up in 2007 as a means to address the country’s woeful savings rate, and its soft compulsion, in that people have to opt out of membership, has swelled to $23.39 billion as at Sept. 30.

NZX's Bennett said the acquisition has driven the company's view that "there is a clear opportunity in the market for a low cost, passive funds provider which has credibility and scale" and that passive management, where a fund typically tracks an index rather than actively pick and choose winners, will follow international experience and attract more investors in coming years.

Separately, NZX also updated its employment litigation with the Clear grain exchange developer Ralec, saying a trial date isn't expected before the end of 2015 and that it expects to pursue a number of interlocutory matters. It also said it is in talks with the Inland Revenue Department over proposed adjustments to historic matters that may have a tax impact of about $1.3 million, though the outcome is still uncertain.

Shares of NZX last traded at $1.22, and have slipped 1.6 percent this year. The stock is rated an average 'hold' based on three analyst recommendations compiled by Reuters, with a median price target of $1.29.

BusinessDesk.co.nz

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