The discounted price offered by CC Capital for the takeover of Insignia Financial still represents an attractive price for shareholders, according to a recent Morningstar report.
Earlier this week, Insignia Financial entered into a deal for CC Capital to acquire all issued shares in Insignia for AUD 4.80 per share in cash. Insignia's board unanimously recommended the transaction.
The scheme of arrangement for CC Capital to acquire Insignia is scheduled to be implemented in the first half of 2026, subject to regulatory approvals.
CC Capital reduced its offer price from the previous 5.00 amount after competing bidder Bain Capital withdrew its bid.
Morningstar said the discount was not excessive and that the current offer "adequately compensates shareholders seeking to mitigate future execution risks".
"We believe the deal is an attractive price for shareholders," said Morningstar.
"It realises value sooner and allows shareholders to avoid the potential risks in executing Insignia's operational improvement initiatives."
Morningstar said the transaction was likely to succeed under current terms in the absence of another competing offer, which it said was unlikely.
"We believe CC Capital is a motivated buyer, having persisted throughout the US tariff-induced market volatility," it said.
"The tariff volatility has subsided, and Insignia has continued to demonstrate fundamental improvements."
Morningstar said the new offer price is 23 per cent above its unchanged stand-alone fair value estimate for Insignia of 3.90 per share.
While flow trends for Insignia have improved, Morningstar noted that its earnings recovery process was likely to be gradual.
"We forecast net profit after tax to grow at just mid-single digit rates over the next five years," it said.
Morningstar said that fee compression and the need for growth investments will persist for Insignia, preventing margins from expanding meaningfully.
"The firm continues losing share in the platforms market and still trails speciality platforms like Hub24 and Netwealth in terms of features and advisor advocacy," it said.
"Additionally, competitive pressures are emerging among major institutional platforms, which have spent the last few years restructuring their businesses."
