CBA agrees to sell 55% stake in Colonial First State to KKR

Maria Nikolova

The deal implies a total valuation for CFS on a 100% basis of $3.3 billion, which will result in CBA receiving cash proceeds of approximately $1.7 billion from KKR.

Commonwealth Bank of Australia (CBA) today announces it has entered into an agreement to sell a 55% interest in Colonial First State (CFS) to global investment firm KKR.

The deal implies a total valuation for CFS on a 100% basis of $3.3 billion, which will result in CBA receiving cash proceeds of approximately $1.7 billion from KKR. The sale price represents a multiple of 15.5x CFS’s pro forma net profit after tax of approximately $200 million.

Upon completion, the transaction is expected to deliver an increase of approximately $1.4-1.9 billion of Common Equity Tier 1 (CET1) capital, resulting in a pro forma uplift to the Group’s CET1 ratio of approximately 30-40 basis points on an Australian Prudential Regulation Authority (APRA) basis as at 31 March 2020.

The deal marks the final stage of CBA’s previously announced planned exits from various wealth management activities over recent years. The estimated financial impacts of the transaction are subject to the final outcomes relating to the capital structure of CFS at completion, accounting adjustments, taxation impacts and separation costs.

Together, CBA and KKR plan to undertake a significant investment program, strengthening the position of CFS as one of Australia’s leading retail superannuation and investments businesses.

CBA remains committed to delivering on the undertakings it made following the Royal Commission. The transaction is not expected to have any impact on ongoing remediation activities that relate to CFS, which will continue as planned. CFS will also continue to assist the Australian Securities and Investments Commission (ASIC) and APRA with existing and any future investigations.

Upon completion, CBA will indemnify CFS for certain pre-completion conduct, including liabilities relating to remediation activities, regulatory actions and third-party claims.

Completion is expected to occur in the first half of 2021.

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