The Westpac Banking Corp (ASX: WBC) share price will be on watch on Thursday following the release of an after-hours announcement.
What did Westpac announce?
This afternoon Westpac announced a fully underwritten offer of ~31 million Pendal Group Ltd (ASX: PDL) shares to institutional investors. This represents approximately 9.5% of Pendal’s shares on issue.
According to the release, the banking giant has agreed to sell the shares for $5.98 per share. This represents a discount of 4% to Pendal’s last close price and a total consideration of just over $185 million.
This sale will complete the divestment of Westpac’s shareholding in Pendal, following earlier share sales in 2007, 2015, and 2017.
Westpac’s Acting Chief Financial Officer, Gary Thursby, explained that this divestment will allow the bank to focus on its core operations.
He said: “Pendal is a highly regarded, independent business, and given Westpac’s commitment to simplify its operations and focus on banking in Australia and New Zealand, now is the right time to complete our divestment.”
What impact will this have?
Once the offer completes, Westpac expects it to add approximately 2 basis points to its Common Equity Tier 1 capital ratio and result in a post-tax accounting gain of $32 million.
It will also have an impact on Pendal’s funds under management. Westpac has gradually been withdrawing its funds from Pendal over the last 12 months and will continue to do so over the next 12 months.
Another withdrawal is expected to occur in two tranches. The first tranche of approximately $1 billion will occur later this calendar year and a further tranche of up to $0.08 billion is expected in 2021.
But unfortunately for Pendal, it may not stop there. Westpac is currently undertaking a strategic review of its wealth businesses and has warned that following this review, “there may be a loss of some or all of the funds that Pendal manages on behalf of the Westpac Group.”
This would be a big blow for the fund manager, given that it currently manages approximately $14 billion for Westpac.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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