The Challenger Ltd (ASX: CGF) share price is one to watch today, after an acquisition update from the Aussie investment group.
Why is the Challenger share price on watch?
Challenger has unveiled its latest acquisition in a pre-trade announcement on Wednesday. The group has entered into an agreement to acquire MyLifeFinance Limited (MLMF) for $35 million.
MLMF is an Australian-based customer savings and loans bank. The bank is currently owned by MyLifeMyMoney Superannuation Fund, also known as Catholic Super.
Challenger hailed the acquisition as “highly strategic” in allowing the group to “significantly expand” its secure retirement income offering.
Challenger will hold an Australian Prudential Regulation Authority (APRA) authorised deposit-taking institution (ADI) licence. That means the group will have access to Australia’s $1 trillion term deposit market following the purchase.
The purchase and regulatory capital requirements will be funded by a $100 million distribution from Challenger Life Company Limited in the March 2021 quarter.
The Challenger share price will be one to watch today after closing 2.2% lower at $5.81 per share yesterday.
Management is hoping the MLMF acquisition can also provide other benefits. In particular, the company is looking to expand its customer access through multiple distribution channels.
Challenger Managing Director and CEO, Richard Howes, was bullish on the purchase. Mr Howes said the digital domestic banking capability will broaden Challenger’s retirement options.
The acquisition is subject to approval from APRA and the Federal Treasurer and is expected to settle in late March 2021.
What else did Challenger announce?
This morning’s announcement also included an update on Challenger’s FY2021 earnings. The investment group continues to expect normalised net profit after tax to be within its guidance range of $390 million to $440 million.
One-off transaction and integration costs of $5 million to $8 million (pre-tax) will be incurred in FY2021 and recognised as a significant item.
The Challenger share price is worth watching this morning while the S&P/ASX 200 Index (ASX: XJO) is tipped to open higher.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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