NZX buying asset manager in deal worth up to $50m

Stock exchange operator NZX is to buy the management rights of QuayStreet Asset Management from Craigs Investment Partners in a deal worth up to $50 million.

NZX will pay $31.25m upfront for the asset manager which has $1.6 billion in funds under management including $481m invested in its KiwiSaver scheme.

That will be made up of $22.5m in cash and the issuance of $8.75m in NZX shares.

A further $18.75m will potentially be payable to Craigs in an earn-out clause based on how much further fund inflows Craigs can direct into the asset manager over the next three years through its advisory network.

NZX chief executive Mark Peterson said the acquisition provided an attractive opportunity to acquire a high-growth fund, aligned with a private wealth network which would help it drive further scale in its Smartshares business.

“Under Smartshares ownership, there will be no immediate change for QuayStreet clients. The QuayStreet funds will be offered as a premium product set and will complement Smartshares’ existing systematic and passively managed product offering. In time, Smartshares, with input from Craigs and clients, will work to align and refine the products to ensure the funds continue to meet customer needs and represent good value for money.”

Peterson said Smartshares would also explore listing the QuayStreet funds.

Simon Tong, chief executive of Craigs Investment Partners, said the deal was strategically important for Craigs and would position it for growth. “We are working closely with Smartshares to ensure the transition is seamless.”

The management of QuayStreet will transition to Smartshares in the last week in February with support services to be transitioned over the next two years.

NZX said it planned to retain the majority of QuayStreet staff.

The acquisition was expected to have a full-year equivalent operating earnings contribution of between $3.3m to $3.6m in FY23 excluding transaction costs, internal and external integration costs (circa $4 million over two years), depreciation and amortisation, interest expenses and the impacts of acquisition accounting).

The financial impact would be included in NZX’s FY2023 operating earnings guidance to be released alongside the FY2022 financial results in February.

The NZX said its full year 2022 operating earnings guidance would remain in the range of $33.5m to $38m.

“The acquisition is intended to be funded from cash on hand and new debt facilities with existing lenders.”