First State Super and Health Super today announced an in-principle intention to merge.
The agreement is subject to an extensive mutual due diligence process, with a target completion date of June 2011.
On current figures the merged fund would be one of the five largest in the country, with 750,000 members and more than $28 billion in funds under management.
The chairs of the two funds, Dr Thomas Parry from First State and Garry Richardson from Health Super, confirmed a heads of agreement had been signed, and said the merger would be in the best interests of members.
First State Super chief executive Michael Dwyer confirmed that he would be the head of the merged fund, while Health Super boss Chris Clausen would be deputy chief executive. First State chairman Dr Thomas Parry will chair the merged fund.
It is not yet clear whether the new fund will be classified as an industry fund, with First State coming from a Government employee background.
“We do have now and will have all the attributes of an industry fund. Bearing in mind we’ve come out of a Government background in NSW we’re actually still considered by the regulators to be a Government fund,” Dwyer said.
He added that First State shared many of the attractive attributes of an industry fund, but having come from a Government background the term ‘not for profit’ was probably the most apt description for the proposed merged fund at this stage.
While it is still too early to confirm the technical features of the merged fund, Dwyer said working groups would be looking at aspects such as administration, investments and custody.
“We don’t want duplication that doesn’t add extra benefit to members, and we want to continue to provide high quality service to members,” he said.
Dwyer said the scale that would be provided would be an important feature of sustainability, particularly in light of the Cooper Review recommendations that funds look to scale to provide the best services to members at the lowest cost. Increased scale would also help deliver better outcomes in negotiations, he added.
In a joint statement the funds said they shared a cultural fit and similar philosophy, with an ‘all profits to members’ business model and focus on value-for-money products, with compatible operating styles, governance principles and strategic goals.
First State Super is a multi-sector fund that covers most employees working in the public sector in NSW, including teachers, police and workers in public hospitals, ambulance services and prisons. Health Super’s core membership is drawn from the health and community services sector, primarily in Victoria.
