In what might be construed as a slow takeover bid, asset finance broking group COG Financial Services Limited (ASX: COG) has acquired 19.99% of diversified financial services company Centrepoint Alliance (ASX: CAF) for a consideration of $13 million.
COG has utilised cash and debt to fund the acquisition. The approximately 39.56 million shares were bought from insurance provider ClearView Wealth Limited (ASX: CVW) at a share price of 33 cents per share, representing a total consideration of $13.05 million.
On November 1, 2021, ClearView secured a 24.5% holding in Centrepoint as consideration for selling ClearView’s financial advice businesses to Centrepoint for $15.2 million. ClearView has held the strategic investment since that date. However, as it shifted its focus to life insurance alone, it decided to sell its strategic investment in Centrepoint.
ClearView’s change of tact came as COG’s strategy transitioned to emphasising scalability. COG Financial works in the finance broking, aggregation, lease and funds management spaces. It holds a small market share, 21% overall, across its divisions, making consolidations, investments and perhaps even acquisitions crucial for growth.
COG’s fundamental strategy has two major components: firstly, it wants to acquire stakes in businesses that distribute financial services. Secondly, the Company aims to establish and expand a substantial business presence in retail funds management.
The strategic rationale for acquiring the CAF interest is that it builds on the first limb of COG’s strategy.
In FY23, COG Financial reported revenue of $363.2 million, up by 13% on FY22. Its EBITDA was down by 5% to $33.9 million, while it saw a $23.1 million contribution from its acquisitions.
By comparison, Centrepoint reported revenue of $271.6 million, with 100% earnings and profit growth amounting to $6.6 million in NPBT.
In its FY23 report, COG Financial affirmed its commitment to building a strong acquisition pipeline, with a $31 million acquisition facility in place with a major Australian Bank. During the past financial year, it acquired a 70% interest in Chevron Equipment Finance through its subsidiary QPF, 100% in the salary packaging business Paywise through its subsidiary Fleet Network and the car and lifestyle asset aggregation groups NFC and UFS.
What’s more, the Company has been going strong with its acquisition endeavours, with one recent hiccup along the way. On October 30, COG Financial made an acquisition bid for accounting services company Diverger (ASX: DVR), offering $27 million cash, marking an 83% increase over the Count offer. On November 15, it withdrew the offer after DVR publicly deemed it was not superior to the offer it already held.
By acquiring the CAF stake, COG is further applying its expertise in the identification, due diligence, integration, and management of interests in financial services distribution businesses, in this case, wealth management services.
COG is not the only one on an acquisition high, with Centrepoint also reporting in August 2023 that it had set aside $10 million for acquisitions. It would be interesting to see which company makes it to COG Financial’s buy list next.
Alinda is a Business Reporter for The Sentiment
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