Commonwealth Bank Announces Sale of 55% of Colonial First State to KKR

Friday, May 15, 2020
Commonwealth Bank Announces Sale of 55% of Colonial First State to KKR

CBA has made a long awaited announcement on the future ownership structure of its investment platform Colonial First State with the announced sale of 55% to KKR


What do you as a member with Colonial funds need to do?

Nothing.
There are no impacts on your investments from this change in the ownership of CFS.
There are no changes to the fee structure of your investments.
 

What has Happened?

CBA has announced (subject to government approval) that it has sold 55% of Colonial First State to KKR for $1.7 Billion.
 
KKR is a huge private equity concern and it will buy the stake through its Asian private equity fund. KKR has over $320 Billion under management around the globe so it is a very large, experienced and serious player in the investment landscape over the past 40 years.
 
CBA had been looking to float the CFS business on the ASX last year as a separate entity but pulled those plans and has now retained a 45% stake in CFS to (as the CBA CEO Matt Comyn stated yesterday) keep some exposure to the growing Superannuation sector to "...create value with the right partner over multiple years"
 

Why has this happened?

CBA has long flagged it was keen to sell out of its' interest in the market leading platform so as to concentrate capital and management time on its core banking operations. This is a theme throughout the Australian Banking landscape as all the majors have announced or are looking to off load their wealth businesses over recent times. NAB has flagged a sale of MLC and Westpac closed down its financial planning arm.
 
CBA sold the Colonial funds management side of the business last year.  This sale was communicated with Hudson members at the time   Again there has been no change to the investments that members have that are managed by the old Colonial Fund Management business now renamed First Sentier Investors.
 
Now CBA has announced a partial sale of the Colonial First State business which houses the First Choice administrative investment platform - where Hudson invests a lot of our members Super, Pension and Investments assets.
 

What is being proposed for CFS?

The announced plan is to grow the business by "investing in the business" via spending on technology , services and education.  This will be much welcomed as in some respects the investment business has taken second fiddle to the much larger core banking business of CBA in the allocation of capital spending over recent years.  More spent on technology and services will make the client experience that much more fruitful and rewarding.

Hudson comment on the sale:


Overall we think this is a net positive for our members who are invested via Colonial First State.
 
The size of the commitment from KKR ($1.7 Billion) shows they are serious about being in the local Wealth space via CFS.
 
KKR and CBA are making the right soundings about investing further in the company to grow its capacity and in particular they are focused on the Superannuation area which is a legislated mandated growth sector in financial services due to the 9.5% (and growing) Super guarantee.
 
By having a standalone company backed by two financially strong shareholders the management achieves a greater level of autonomy than they have currently, as an often neglected subsidiary of a major bank with its focus elsewhere.
 
Hudson will monitor the progress of the new ownership structure going forward but for now we feel this will be a favourable event for our members.
 
If you have any questions on the sale please call 1800 804 296 to book in a call with your Hudson adviser to discuss further.

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