Legal and General has this morning announced that is buying the 75 per cent cent stake in platform operator Cofunds that it does not already own, in a deal that values the previously independent platform at £175m.
In a statement to the London Stock Exchange this morning (26 March), the blue-chip life and pensions company confirmed it has bought out the remaining stakeholders International Financial Data Services (24 per cent), Threadneedle (20 per cent), Newhouse Capital Partners (18 per cent), Jupiter (10 per cent) and Prudential (3 per cent).
The insurer will pay a £131m cash consideration to acquire the business, which it says will form a new business unit within the company’s savings division alongside Investor Portfolio Services. The cost synergy benefit is expected to be £11m a year from 2015, with a one-off investment cost of roughly £17m.
Cofunds is the UK’s largest investment platform and has over £50bn of asset under administration, representing a share of 22 per cent of the UK investment platform market.
The deal comes after months of speculation, dating back as far as November 2011, when it was first mooted that L&G had been preparing a £200m bid for the platform.
In January 2012, market speculation resurfaced claiming that a deal between the two companies was understood to be close to completion.
Financial Adviser sister title FTAdviser exclusively revealed in November 2012 that the buyout was close to happening - on broadly the same terms as the initial November 2011 approach - as a source close to the company confirmed the two parties were entering “third round” talks.
The transaction is anticipated to complete in H1 2013 and to be bringing in earnings by the end of 2014.
Mark Gregory, chief executive of savings at Legal & General, said: “As we said at our preliminary results, digital solutions is one of our five drivers of growth.
“The projected growth in the investment platform market is substantial and we expect Cofunds to be a major beneficiary of this growth. Cofunds, alongside our existing platform IPS, provides us with the scale and capability to be a major player in this important and growing market.”
“The Cofunds team have done a fantastic job in growing the business to be the largest platform in the UK market. We have worked with the team over a long period and recognise the excellent value and customer service the platform provides, and look forward to working with them to grow the business.
“Our acquisition of Cofunds will create a great opportunity to extend our asset gathering capability and grow our Savings business.”
Charlie Eppinger, chairman of Cofunds, said: “The consortium ownership has served Cofunds extremely well for a long time, providing market knowledge, know-how and capital, however the platform needs to move to the next stage and it will greatly benefit from a single shareholder with a long-term commitment to the UK market.”
