Deanne Stewart, First State Super

First State Super and WA Super are in potential mergers talks, the latest in a flurry of deals that are expected to sweep across the $2.9 trillion superannuation industry this year.

First State, which is still finalising its tie up with VicSuper, has signed a Memorandum of Understanding with the $4 billion WA Super fund to undertake an extensive due diligence process that will likely be completed by mid year, according to a joint statement. First State chief executive Deanne Stewart said the motivation for the $105 billion fund was to grow its national footprint.

“The ability to merge with WA Super does give us a strong presence and ability to support our members in Western Australia,” she said in an interview. “There are a lot of conversations going on in the market at the moment so you have to make sure you having the right conversations with the right people.”

First State’s tie up with VicSuper to create a $129 billion is still expected to be completed by June 30, just in time for a final decision to be made on whether to proceed with the WA Super merger. Stewart said that when she began informal talks with WA Super’s CEO Fabian Ross late last year, a top priority was to ensure that it would not impact on the VicSuper deal which will create Australia’s third-largest industry fund.

“We would stage the (mergers) appropriately,” she said. “We’ve made sure that we have resourced appropriately and to get the timing right.”

For WA Super, Ross said they wanted to be proactive after the possible three-way merger with Tasplan and Statewide Super collapsed last year. With mergers part of the fund’s growth plan, they decided to find a larger partner instead.

“It was about knowing where the market is moving to and recognising how important size and scale is,” the Perth-based CEO said. “Rather than wait for two to three years down the track when First State might be too busy, we didn’t want to lose the opportunity.”

Both CEOs said the funds shared common values and heritage, a similar membership base and an understanding of the value of financial advice that would help make the merger successful. First State, together with its financial planning business StatePlus, already has a presence in WA that supports nearly 8000 members and clients across the state. By combining with WA Super, the merged fund would have around 60,000 members in WA alone.

QSuper and Sunsuper announced the same day that they too have signed a MoU to begin exclusive due diligence which would create Australia’s largest superannuation fund overseeing more than $195 billion in assets. Other mergers in the works  includes Tasplan’s combination with MTAA Super to create a $22 billion fund and Equip Super and Catholic Super’s landmark $26 billion deal.

With two potential merger deals already under Stewart’s belt, the CEO said that she would be open others in the future as long as it was in the interest of members.

“The past 12 months has seen unprecedented consolidation in the Australian superannuation industry, and I expect this will increase in the years to come,” she said. “To ensure that we deliver our members the best possible returns at the lowest cost, we believe size and scale matter.”

Sarah Jones is the deputy editor of Investment Magazine. She previously worked for Bloomberg News in London for more than 12 years covering equity markets and global asset management. Prior to moving to the UK, she worked for Australian Associated Press in Sydney covering economics and monetary policy.
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