Charter Hall Group (CHC) fell 7.5% yesterday after announcing it was buying 50% of David Paradice’s Paradice Investment Management business valuing the company above $400m. The investment house was set up over 20-years ago and has evolved into one of Australia’s most respected boutique equity managers with $18bn of assets under management.
This is a big step for both companies who appear to have some very healthy mutual respect for each other, for CHC it’s a clear deviation away from being a specialist property investor. We believe there are definite synergies between the 2 businesses and as superannuation giants have started to dominate M&A activity it makes sense to MM although the market clearly wasn’t convinced yesterday i.e. more clout should help CHC over the coming years. To put the deal into perspective CHC’s FUM will increase by 30% to just under $80bn delivering with it the opportunity to look at bigger and potentially better deals.
We like the deal by CHC and if yesterday’s selling follows through we feel value will present itself under $19.
MM likes CHC under $19
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