Commonwealth Bank of Australia will divest 55 per cent of its holding in Aussie Home Loans in a deal that would merge the company with fellow mortgage broker Lendi.
The deal, first reported by The Australian Financial Review's Street Talk column in November, will create a new mortgage broking firm with a nearly $80 billion loan book and 220,000 customers.
Lendi CEO David Hyman said he had first discussed merging with Aussie Home Loans "three or four years ago". James Brickwood
Under the deal, Lendi shareholders, which include ANZ and Macquarie Group, will take a 55 per cent stake in the merged company, with CBA taking the remaining 45 per cent.
The exact financial details were not disclosed, but the terms are surprisingly favourable to Lendi, which is far and away the junior of the two by most metrics. It has an $8 billion loan book to Aussie's $70 billion, and 20,000 customers to Aussie's 200,000.
CBA said it would receive deferred consideration and a pre-completion dividend payment of $105 million.
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CBA bought a one third stake in John Symond's Aussie Home Loans in 2008, which it increased to 100 per cent in 2017. But following the Hayne royal commission, which heavily criticised vertically integrated business models, CBA announced it would sell of the company.
David Hyman, chief executive and co-founder of Lendi, said both he and Aussie Home Loans CEO James Symond would stay on at the new company and both brands would be retained. He would not say what the new company would be called or who would be chief executive.
While the new company will have three major banks as shareholders, Mr Hyman told the Financial Review there would be no preferential treatment of owner banks. He said engagement with big banks would be at an "integration level, rather than distribution level", meaning there would be more streamlined information sharing rather than discreet channelling of customers into the owner banks' products.
“Our people are not remunerated nor incentivised to recommend any bank or lender over another," he said, adding the platform technology "only takes into consideration your needs and financial situation when it is making a recommendation".
He said the board of the new companies would be made up of one CBA representative, one ANZ representative, and six independent directors. The six independent directors would form a subcommittee to deal with the companies' relationship with lenders.
Mr Hyman said the deal was a long time in the pipeline, with initial conversations with Mr Symond about a possible merger occurring "three or four years ago". He said he believed CBA's decision to retain a 45 per cent stake in the new company, when it could have sold outright, demonstrated its commitment to the new venture.
Mr Symond said the deal was "an important step in the almost 29-year evolution of Aussie as Australia’s leading retail mortgage broker".
"We are currently posting record lending volumes through our network of over 970 brokers and over 210 stores and, by underpinning Lendi’s technology across our national broker network, we will further accelerate this growth and momentum," he said.
CBA chief executive officer, Matt Comyn, said: “We believe the combined business will have a stronger platform to offer enhanced digital capabilities for Aussie brokers and a superior experience for customers."
Mr Hyman said ANZi, the venture capital arm of ANZ that owns a stake in Lendi, had indicated it was "supportive in principleof the transaction,i ncluding the investment of an additional capital amount to the merged group ".
ANZi managing director Ron Spector said he was "excited by the opportunity of two great mortgage broker brands coming together to further this mission".
We look forward to supporting the team in delivering this compelling customer proposition," he said.
The deal requires approval from the Australian Competition and Consumer Commission. Pending that, it would likely complete in the middle of 2021.