Statewide Super is looking for a new partner following the collapse of merger talks with WA Super and Tasplan Super – a merger that would have created a $24 billion superannuation fund had the three parties clinched the deal.
Further merger opportunities will be reviewed on a case-by-case basis, with members’ interests at the forefront, Statewide Super chief executive Tony D’Alessandro said on Friday.
Meantime, on Friday, Tasplan wasted no time in announcing that it has entered into a binding memorandum of understanding with MTAA Super to explore a merger. If a merger between Tasplan and the super fund for motor trade industry employees, goes ahead, the combined entity would be worth more than $22 billion.
The merger activity comes just as the prudential regulator is bringing pressure to bear on funds in a bid to ensure members get economies of scale from bigger funds.
Speaking of scuppering the tripartite merger talks between Statewide, Tasplan and WA Super, D’Alessandro explained mergers are very hard to complete when there are three parties involved.
According to the chief executive of the $10 billion superannuation fund, governance wasn’t an issue. But it was clear the integration challenges were formidable.
“The complexity of a tripartite agreement – three investment philosophies, three sets of fees, three sets of custodians – it became almost overwhelming in terms of being able to deliver something in a timely manner that would end up being in the best interest of our members,” he said.
“The implementation risk was essentially too high. The risk of failure started to get higher.”
D’Alessandro said if he he had his life over again he would have forged a bilateral agreement.
The Statewide head conceded that, in hindsight, the complexities involved with a three-way merger were foreseeable .
Acknowledging the synergies back in April, the three funds immediately went into an MOU. It was only during the discovery process they realised that delivering a good member outcome would be a “long play”.
“As it turned it out, we might not have realised everything we wanted to,” he added.
Having ended the tripartite merger discussions, Statewide Super is talking to other parties.
Importantly, the prospect of a better partnership is not the reason D’Alessandro pulled the plug on the deal.
“We didn’t get a better offer but I expect phone calls from other super funds now,” he said.
Given that asset owners are facing an increasingly unfriendly environment with higher operating costs and a revenue squeeze, wouldn’t he prefer to partner with a bigger fund?
“The answer is maybe,” he said, while adding that if a potential merger moved the super fund incrementally, he probably won’t go with it.
In is view, the whole idea of scale has changed since the the proposed First State Super tie-up with Vic Super.
“If you look at fund size, $50 billion provides scale – anything between $10 billion to $50 billion is boutique.
According to the Statewide head, a super fund with $23 billion of funds under management “gets you in the game but you are sort of at a bus stop”.
“We have a member-first culture and we are open to merger propositions as long as it is proven to be in member’s best-interest,” he said.
“Statewide Super has a positive position in the marketplace and this means the breadth and scale of a merger would need to make sense for the fund and our members.
“We will continue to look for ways to deliver greater value, improve returns, and negotiate better insurance cover, and we know that sometimes mergers are the best way to deliver this,” D’Alessandro said.