SelfWealth Ltd (ASX: SWF), a prominent Australian low-cost broker, announced on November 13, 2024, that it has received a non-binding indicative offer from Bell Financial Group (ASX: BFG) to acquire 100% of SelfWealth’s shares at $0.22 per share in cash. This offer values SelfWealth at approximately $51 million, marking a significant premium of 83% to SelfWealth’s last traded price of $0.12 before the announcement. The offer also allows shareholders the option to receive Bell shares as consideration, opening a pathway for SelfWealth investors to retain an interest in the combined entity.
Key Details of the Proposal
Bell’s acquisition proposal is structured as a scheme of arrangement and includes a mix of cash and scrip options, giving SelfWealth shareholders flexibility in deciding their preferred form of consideration. The SelfWealth board has deemed the proposal “highly attractive” and has entered an exclusivity agreement with Bell, effectively providing a three-week negotiation period to finalise the terms of a binding deal. During this period, SelfWealth is bound by customary restrictions, including “no shop” and “no talk” clauses, which limit engagement with other potential acquirers. A fiduciary clause does, however, allow SelfWealth to entertain superior offers should they arise.
Bell Financial Group’s chairman, Brian Wilson, highlighted the strategic fit of the acquisition, pointing to an anticipated increase in scale for Bell’s online broking platform and the addition of almost 130,000 active SelfWealth portfolios, which will bring Bell’s total holdings to $94 billion. “Clients of both businesses will benefit from a superior user experience through leveraging the respective strengths of both businesses,” Wilson stated. SelfWealth’s chair, Christine Christian, echoed this sentiment, emphasising the advantages of Bell’s broader wealth management capabilities for SelfWealth’s client base.
SelfWealth’s FY24 Financials: A Snapshot
The acquisition proposal arrives on the heels of SelfWealth’s robust FY24 performance. For the year ending June 30, 2024, SelfWealth reported a significant uptick in profitability, with a 36% increase in underlying EBITDA to $5.5 million, up from $4 million in the previous year. Net Profit After Tax (NPAT) surged to $3.4 million, a massive leap from just $0.1 million in FY23. The firm’s gross profit margin also saw an improvement, rising from 69% to 70.5%, even as operating revenue declined slightly by 6% to $27.6 million amid challenging market conditions.
A disciplined cost management strategy underpinned these gains. SelfWealth reduced operating expenses by 16.6% over the year, thanks in large part to streamlined operations and a reduction in marketing and headcount costs. CEO Craig Keary, who joined SelfWealth in October 2023, has overseen this shift, steering the firm towards a more customer-centric model and overseeing a multi-phase transformation program. This program included enhancements to SelfWealth’s trading platform and a focus on cyber and data security, a timely emphasis as regulatory demands in the sector intensify.
The company’s financial health remains sound, with cash reserves of $11.4 million and no debt, which positions it to continue investing in its long-term growth strategy. SelfWealth has also pursued shareholder value initiatives, including two share buy-back programs over the past year, resulting in the buy-back and cancellation of 3.3 million shares.
What’s Next?
The Bell proposal is still subject to several conditions, including SelfWealth board approval, shareholder and court approvals, and no significant changes to SelfWealth’s business. Should SelfWealth and Bell reach an agreement on a binding implementation deed, the SelfWealth board has indicated its intention to unanimously recommend the proposal to shareholders, pending no superior bids. Given the exclusivity period of three weeks, the next step will likely be the conclusion of negotiations by early December, though a short extension may be considered if the parties are close to finalising terms.
If successful, this acquisition would not only represent a solid exit for SelfWealth shareholders but would also propel Bell Financial Group’s scale and capabilities in Australia’s competitive online trading space.
