Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

No deal: Praemium (ASX:PPS) rejects Netwealth (ASX:NWL) merger

The Netwealth Group Ltd (ASX: NWL) and Praemium Ltd (ASX: PPS) share prices will be on watch today after Netwealth proposed to merge the two companies.

Both the Netwealth Group Ltd (ASX: NWL) and Praemium Ltd (ASX: PPS) share prices will be on watch today after Netwealth proposed a merger of the two companies.

Currently, the Netwealth share price is largely unmoved at $17.20.

Conversely, the Praemium share price is racing upwards, increasing 15% to $1.43.

NWL share price

Source: Rask Media Netwealth share price
Source: Rask Media NWL 2-year share price

PPS share price

Source: Rask Media Praemium share price
Source: Rask Media PPS 2-year share price

Netwealth eyes off Praemium

Netwealth submitted a non-binding proposal to Praemium intending to merge the two entities.

Praemium shareholders would receive 1.00 Netwealth share for every 11.96 Praemium shares held.

Additionally, Praemium shareholders would receive net proceeds from the sale process of Praemium’s international operations above $50 million.

The deal implies a valuation of $1.50 per share for Praemium and is a 29% premium to its closing share price.

From an enterprise value (EV) lens, the deal values Praemium at $775 million and on an EV/EBITDA multiple of 55 excluding international sale proceeds.

Strategic match

The acquisition would result in $72 billion funds under administration (FUA), solidifying Netwealth’s position as the largest independent platform.

The combined group would hold $22 billion in non-custody assets. Additionally, each would be able to leverage relationships with existing advisors and client bases.

The transaction will accelerate Netwealth’s strategy into non-custody services through Praemium’s industry-leading portfolio reporting and administration.

Praemium will benefit from Netwealth’s tech portal and scale.

“Netwealth believes that a merger with Praemium would build upon the respective strengths of both companies to enhance the position of the combined group as the fastest growing wealth management platform in the Australian market”.

Thanks but no thanks

In response to the proposed merger, the board “unanimously concluded that the proposal undervalues Praemium’s business and is not in the best interests of Praemium shareholders”.

Praemium noted the offer does not appropriately reflect its current performance, technology and growth momentum in addition to recent deal premiums in the sector.

The Praemium board remains open to engagement on a more appropriate valuation.

My take

Praemium has always been a logical target for Netwealth given the business wants to expand into non-custody assets.

Another logical suitor is Hub24 Ltd (ASX: HUB). Given its now known Praemium is up for grabs, Hub may make a competing bid.

It’s not surprising to see Praemium reject the first offer. It’s a fair deal but likely not enough of a takeover premium to warrant further engagement from the board.

I expect Netwealth to increase its offer in the near term to try and get this deal done.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies or funds mentioned.
Skip to content