Wealth management and broking company IWL Limited (IWL) will be absorbed into the Commonwealth Bank of Australia's (CBA) broking division CommSec, if its acquisition by the banking group goes ahead.
The CBA announced yesterday it intends to acquire the whole of IWL for more than $370 million.
"If it goes ahead IWL will be absorbed into part of CommSec, it would be merged," IWL chairman Rob Bishop said.
Bishop said the group has been in discussions with CBA for only a short time, stating the Melbourne-based group was not up for sale prior to the offer.
"It hasn't been for sale, [the CBA's offer] was not a solicited offer. Though as a board we were obliged to respond which we have," he said.
"We will continue to work on until such time as the scheme of arrangement is through. We think it's a fair and reasonable offer. But there's a process that has to be gone through."
IWL chief executive Otto Buttula said: "We didn't go out looking for an offer. It's a friendly offer.
"We worked out an offer that should be put to shareholders. Our advisers Goldman Sachs JBWere has agreed, and it falls within the range.
"It's been a really smooth process with CBA. We've been highly impressed with the negotiations. It's been efficient."
CBA and IWL have entered into a scheme implementation deed proposing CBA will acquire all of the issued capital in IWL for about $373 million or $6.57 per share, less any dividend paid by IWL for the period ended June 30, 2007.
A CBA spokesperson said it was too early to comment on exactly how they planned to integrate IWL into CommSec.
"It's too early to say what we'll be doing. We will go in and have a good look at the business," the spokesperson said.
"IWL has a strong wholesale business, and the wholesale business, it's a market segment where CommSec is underweight.
"We believe we can add this wholesale area to our CommSec offering and make it strong."
IWL shareholders will receive the consideration wholly in cash or through CBA shares to an equivalent value, under the proposed arrangement.
The offer represents a premium of 11.7 per cent to the last closing price, 22.5 per cent to the three-month volume weighted average price (VWAP) and 29.3 per cent to the six-month VWAP as at the close of trade on July 31, 2007.
An integral part of the offer was ensuring the support of Buttula.
Buttula has entered into an option deed with CBA over his 13.1 per cent direct shareholding and related interests in IWL, the details of which will be disclosed by CBA in a substantial holder notice to be lodged with the Australian Securities Exchange.
In April, IWL sold its financial advisory software, VisiPlan, to Iress for around $50 million. Iress also owns competitor Xplan.
