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IOOF delays ANZ pension buyout after inquiry

Sydney

AUSTRALIAN wealth manager IOOF Holdings Ltd said its buyout of pension assets from Australia and New Zealand Banking Group Ltd (ANZ) has been delayed by at least three months, as fallout from a damaging finance sector inquiry hits dealmaking.

In a stock exchange filing on Tuesday, IOOF said its US$705 million deal to buy part of ANZ's pension unit would now take place after Australia's third-largest bank had formally split its pension assets, which IOOF expects to be by July 1.

When the companies announced the deal in 2017, they said they expected it to be wrapped up by the end of March. Though many merger-and-acquisition deals experience delays, the new timeline shows the impact a Royal Commission inquiry into Australia's finance sector is having on major decisions of the country's top lenders, even before the inquiry delivers its final report next month.

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IOOF was among the worst-hit companies by the inquiry last year which aired allegations that IOOF used pension customers' funds when compensating them for losses caused by the wealth manager.

The evidence caused financial watchdog the Australian Prudential Regulation Authority (APRA) to recommend banning IOOF's top two executives from running the wealth manager, prompting the pair to step down in December and the company's shares to drop.

APRA has since requested a change in ANZ's sale contract with IOOF, under which the bank will formally split its pension assets, IOOF said in its statement on Tuesday. IOOF's buyout would only settle once ANZ had made that change, the wealth manager said.

"It's hard to say if it (the sale) will go through or not," said a banking analyst who asked not to be identified. "It was always going to be a tough sale, and this probably reinforces that view."

ANZ, in a separate statement, said the split would allow it to sell other pension assets to Zurich Financial Services Australia regardless of the IOOF delay. An ANZ spokesman declined to comment about the time frame of the IOOF sale.

Shares of ANZ and IOOF were each up about one per cent in a higher overall market on Tuesday. IOOF shares are still below the price they were at before the executive changes five weeks ago. REUTERS