Australia-based fund manager Challenger Financial Services Group is buying wholesale mortgage financier Interstar Securities for A$85 million ($95.3 million) as part of an A$133 million purchase from Zurich Financial Services.
Challenger was created from a merger earlier this year with Australian tycoon Kerry Packer’s investment company, CPH Investment, and is a listed company with a market capitalisation of nearly A$1.4 million. It recently sold its New Zealand operations to Equitable. Interstar is one of the major sources of non-bank mortgage finance in New Zealand.
"The acquisition of Interstar provides Challenger an opportunity to enhance its broader financial services platform with Interstar's expanding wholesale mortgage distribution base and leverage on Interstar's reputation in global capital markets," Challenger said in a statement announcing the deal.
Another Australian listed company controlled by Packer, Pubishing & Broadcasting (PBL) owns 25% of another major mortgage wholesaler, Australian Mortgage Securities, which is also 25% owned by Wizard Home Loans. The other two shareholders are Deutsche Asset Management and Wizard founder Mark Bouris.
Challenger chairman James Packer, son of Kerry, was reported as saying that the acquisition shouldn’t be linked with the family's other mortgage-related interests.
"Interstar is viewed as a long-term investment and is fundamental to building shareholder wealth for Challenger's investors," Packer said.
Challenger chief executive Chris Cuffe was also reported as saying that: "these are completely separate businesses. The ownership link has been overplayed." Neither Challenger nor Interstar returned telephone calls today.
John Grant, head of Wizard in New Zealand, says his company has no comment on the Challenger purchase. "It is one of our shareholders that’s bought the business but it’s their perogative what they do," he says.
The other assets Challenger is buying from Zurich is a high-yield fixed interest and loan portfolio, and 84,500 hectares of forestry assets.
Interstar, which reported a pre-tax profit of just under A$20 million in the year ended June 30, has an A$11 billion mortgage portfolio and employs 160 staff based in Melbourne. It wholesales residential mortgages, financing them with securities issued in the US, Australia and Europe.
