When will Praemium unload its international business?
The completion of the sale of the international business is the next challenge for Praemium, as the platform looks to focus on its domestic business.
Anthony Wamsteker was made permanent CEO, after replacing Michael Ohanessian in an interim basis after his departure in May.
Also the founding CEO of ME Bank, Wamsteker was chair at the time of Powerwrap’s acquisition was later appointed Praemium’s board.
Becoming CEO of Praemium was a surprising turn of events, Wamsteker said, as it was not something anyone anticipated as the acquisition unfolded.
“It wasn’t something I anticipated by any stretch of the imagination, but now that it’s played out that way I’m enjoying working with the team at Praemium,” Wamsteker said.
“We want to be a great supplier to the financial advisers of Australia, so it’s a great challenge.”
At the time of Ohanessian’s departure, the board had appointed Deloitte Corporate Finance to undertake a strategic review of Praemium’s international business which it was now in the process of selling.
Wamsteker said they were still working through the process and there’s been strong interest in the international business.
“We’re just working through the process of getting everything ready in an information deck for all the people who have lined up expressing interest,” Wamsteker said.
“It was just a business decision to look at the business operations, because we’ve going at that for quite a number of years – going on 10 years.
“In that time, we have done a tremendous job because from that standing start – we’ve built a platform based on the Australian technology that captured half a percent of the market share in the UK platform market.”
When it the proposed sale was announced last month, the firm viewed the business at a scale disadvantage and Wamsteker said there was too many “established players” in the UK market.
“The view we had to take was what it’s going to take to go from half a percent to say 4% to 5% market share, which would be the next objective,” Wamsteker said.
“It’s the point where you’d say it’s got to scale to be an effective business in that market and that journey isn’t easy.
“It was just having to take the decision about how much that would take, how long it would take and what that could cost to build it out to the point where we thought it started to have real scale.
“The conclusion of that was that it was probably going to require somebody who had a closer connection with the international market, particularly the UK platform market.
“We have a lot to do in both the international and Australia [markets], so it was just a question of narrowing our focus to one of the other and allowing somebody who wants to focus on the international segment to pick that up.”
Analysis from MST Financial senior analyst, Lafitani Sotiriou, said: “A review conducted by Deloitte and initiated by the board of PPS, concluded the international business had insufficient scale and it was better to be sold.
“We see this as a mistake as the hard work is done and there is enormous upside to that part of the business and selling it while it was largely breakeven wouldn’t attract a valuation that would justify the footprint created and net-flow momentum it has.”
Research from Ord Minnett said all three businesses (Praemium Australia, International and Powerwrap) all had strong operating momentum.
“Whilst much now depends on the potential price for the international business, we believe a successful sale is likely to increase the attractiveness of the Australian business to a domestic suitor,” Ord Minnett said.
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