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Commonwealth Bank of Australia (ASX: CBA) has struck a deal to sell off more than half its ownership of wealth management business Colonial First State (CFS) to global investment firm KKR for $1.7 billion.
It has now been almost two years since the bank announced plans to demerge CFS, which has been riddled with class actions since the Royal Commission, but that move was put on hold in March 2019 so CBA could attend to the commission's recommendations.
Now the bank appears to be changing tack slightly, offloading a 55 per cent majority stake to New York-based KKR while keeping a minority share in CFS and embarking on a "significant investment program" with its new partner.
CBA says the transaction is consistent with a strategy to focus on its core banking businesses, while allowing CFS to become a more focused standalone business.
The sale price represents a multiple of 15.5x CFS's pro forma net profit after tax of approximately $200 million.
"We are confident that together with KKR, we can provide CFS with an increased capacity to invest in product innovation, new services and its digital capabilities," says CBA chief executive officer Matt Comyn.
"We have a shared vision for CFS to be one of the leading superannuation and investment businesses in Australia, offering members greater choice and better value."
CFS chief operating officer Michael Venter says the group is excited about the future opportunities this transaction is expected to deliver for members.
"Further investment over the coming years will result in a better member experience and we expect the investment will deliver a wide range of benefits for all of our stakeholders," he says.
KKR Australia partner and head Scott Bookmyer says the company is honoured to have the opportunity to invest alongside CBA to further the success of CFS as a leading platform.
"CFS is one of the most respected providers of investment and superannuation services in Australia with a highly regarded product and service offering to members and advisors," says Bookmyer.
"CFS is a major superannuation and investment platform with a premium brand and a very important role managing the superannuation and personal wealth of over one million Australians," adds KKR Australia's head of private equity David Lang.
"We are pleased and privileged to have the opportunity to partner with CBA and invest in CFS's ambitions to drive innovation and deliver a best-in-class offering."
The sale price is estimated to result in a post-tax gain on sale of approximately $1.5 billion, which includes estimated post-tax separation and transaction costs for CBA of approximately $180 million.
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