SEQUOIA FINANCIAL GROUP LTD — M&A Activity 2017

Jun 18, 2017

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Sequoia Financial Group Ltd
ACN: 091 744 884
ASX: SEQ
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ASX Release

19 June 2017

Sequoia Financial Group Ltd proposed acquisition of InterPrac Limited in all scrip transaction

Sequoia Financial Group Limited ( ASX: SEQ ) (“SEQ”, “Sequoia” or “the Company”) today announces the proposed acquisition of InterPrac Limited (“InterPrac”), a well-established financial and professional services business that is highly complementary to Sequoia’s existing operations and that, subject to completion of the proposed acquisition, will deliver immediate scale to a number of the Company’ operating divisions.

Completion of the proposed acquisition is subject to a number of conditions precent, including completion of due diligence to the satisfaction of the Company, entry into formal documentation and all relevant and necessary regulatory and shareholder approvals being obtained by the Company.

Sequoia will commission an independent expert's report in respect of the proposed acquisition and will convene an extraordinary general meeting of shareholders, expected to be held in late August.

A highly complementary acquisition

Founded in 2001 and headquartered in Melbourne, InterPrac is a profitable and growing business with a staff of 40 professionals assisting accountants and financial planners deliver financial planning, insurance, finance, SMSF administration and technical support for their practices.

The business is highly complementary to a number of Sequoia’s current operating divisions and will add immediate scale, in particular to the SMSF Administration, Wealth Advisory and Investment Solutions divisions. The Company is confident that considerable organic growth can be delivered from these divisions as a result of the increased scale that the InterPrac transaction will deliver on and from completion of the acquisition.

Following completion, InterPrac’s current team will continue to operate the Interprac business and a number of their management team will join Sequoia’s management ranks to capitalise on the growth opportunities that the combination of both businesses presents. Mr Garry Crole (the Managing Director of Interprac and also an Interprac vendor) will continue as a Director of Sequoia, a position he has held since November 2016.

Transaction terms and financial impact

The transaction terms are contained in a binding term sheet between the Company and InterPrac.

As consideration for the acquisition of InterPrac, the vendors will be issued 42,777,000 fully paid ordinary shares in Sequoia at $0.30 per share (" Consideration Shares ") valuing the business at $12.83M. This valuation includes $2.2M combined value in net cash & ASX listed investments. To the extent, the net cash & ASX shares at the completion date is below $2.2M, the Consideration Shares will be reduced pro rata at a deemed issue price of $0.30 per Consideration Share (or repayable by the vendors in cash to the extent the deficit is only determined after the Consideration Shares have been issued).

InterPrac current shareholders include Garry Crole and Brent Jones as executive directors of InterPrac of which Garry Crole is also a non-executive, director of the Company but has not participated in any deliberations by either Board on the proposed acquisition. As part of the shareholder approvals, the Company will seek specific approval for Garry Crole's participation in the transaction.

75% of the Consideration Shares (being 32,082,750) will be subject to a voluntary 12-month escrow. Two of the Interprac vendors, Garry Crole and Brent Jones will have 100% of their Consideration Shares (being an aggregate of 20,923,000) escrowed for the first 12 months after completion. Post the completion of the transaction, Sequoia will have 91,575,775 fully paid ordinary shares on issue.

InterPrac is a profitable and growing business that has delivered consistent growth in revenue in the past three years. For the 6 months ended 31 December 2016, the business recorded unaudited revenue of $9.56M (up 33.2% on the 2015 year) and net profit after tax of $375k. The business has no outstanding debt and net cash & ASX listed investments in excess of $2.2M. For FY 2016 InterPrac EBIT was $2.1M.

Subject to completion of the InterPrac acquisition, a summary of the likely effect of the transaction on the Company's consolidated total assets, total equity interests, securities on issue, profit before tax and revenue is set out below.

Particulars	Before transaction	Increase/Decrease due to transaction *unaudited	After transaction	Percentage change due to transaction
December 2016
Total Consolidated Assets	34,841,063	8,487,564	43,328,627	24%
Total EquityInterests	9,696,489	6,481,405	16,177,894	66%
Total Securities on Issue	48,798,706	42,777,000	91,575,706	88%
Profit before tax - 6 month	706,698	596,161	1,302,859	84%
Revenue - 6 month	17,586,324	9,561,565	27,147,889	54%

Expected timing

The Company expects to conduct due diligence and enter into formal agreements by the end of July 2017, following which the Company intends to despatch a Notice of EGM and convene a shareholders meeting in late August 2017 (or early September). Completion of the transaction will follow the shareholders meeting if all approvals are obtained.

ABOUT SEQUOIA FINANCIAL GROUP LIMITED

Registered Office: Level 36, 50 Bridge St Sydney NSW 2000 Australia

ASX-listed Sequoia Financial Group Limited (ASX: SEQ) is an integrated financial services company providing products and services to self-directed retail and wholesale clients and those of third party professional service firms.

It provides:

• Investment and superannuation products

Phone: +61 2 8114 2222 Fax: +61 2 8114 2200 Email: admin@sequoia.com.au Website: www.sequoia.com.au

• Wealth management and advisory services

• Corporate advisory and capital markets exptise

• Retail, wholesale and institutional trading platforms

• Market data and financial news services

Sequoia operates various AFS Licenses and its subsidiary D2MX is an ASX Market Participant

Management commentary

Sequoia’s Managing Director and CEO Scott Beeton said: “ InterPrac is an outstanding business that will complement Sequoia’s current operations and will deliver immediate scale to a number of our high-growth divisions. We are delighted that Garry Crole and Brent Jones will join the Sequoia senior management team following completion of the InterPrac acquisition. We have worked successfully with Garry since his appointment to the Sequoia Board and he has delivered significant value. We look forward to welcoming him as an executive of the Company.

The proposed acquisition is of a business that is profitable, has growing revenue streams, a strong balance sheet and is a great opportunity and marks an important next step in our growth. We look forward to presenting further details of the proposed transaction to shareholders as soon as possible to seek all necessary approvals.

The current Sequoia business is well placed for growth in FY2018 and all operating divisions continue to seek out opportunities to provide value to shareholders and clients. To this end, the Trading & Execution division has provided notice of termination to its clearing and settlement provider and is considering a number of alternative clearing and settlement solutions. Sequoia continue to focus on suppliers able to meet our client ongoing needs in a timely, efficient and compliant manner that support our value propositions. We look forward to reporting on FY2017 results, clearing and settlement considerations and the outlook for the current year at the end of August.”

For further information, please contact:

Scott Beeton, Group Managing Director and CEO: +61 400 252 425 Garry Crole, InterPrac: +61 3 9209 9777 Marika White, Company Secretary: +61 2 8263 0515

ABOUT SEQUOIA FINANCIAL GROUP LIMITED

Registered Office: Level 36, 50 Bridge St Sydney NSW 2000 Australia

ASX-listed Sequoia Financial Group Limited (ASX: SEQ) is an integrated financial services company providing products and services to self-directed retail and wholesale clients and those of third party professional service firms.

It provides:

• Investment and superannuation products

Phone: +61 2 8114 2222 Fax: +61 2 8114 2200 Email: admin@sequoia.com.au Website: www.sequoia.com.au

• Wealth management and advisory services

• Corporate advisory and capital markets exptise

• Retail, wholesale and institutional trading platforms

• Market data and financial news services

Sequoia operates various AFS Licenses and its subsidiary D2MX is an ASX Market Participant