Morningstar gives Insignia PE bidders equal chance of success

The Insignia Financial board’s approval of either of the current PE takeover offers will appeal to long-term shareholders in the company and provide them with a smoother exit, according to research and ratings house, Morningstar.

In an updated analysis of the competing bids for Insignia from Bain Capital and CC Capital Partners, Morningstar’s equity analyst, Shaun Ler said that both bidders had an equal probability of success.

At the same time, he noted that Morningstar had raised its fair value estimate for Insignia to $4.60 per share from $4.50 aligning with the offers from Bain and CC.

“We also raise our stand-alone fair value to $3.90 per share from $3.60, reflecting better-than-expected improvement in fund flows. The takeover premium, at about 18% above our stand-alone valuation, is solid but not overly generous,” he said.

“Platform net inflows and master trust net outflows over the six months to December 2024 were considerably better than expected. Strong performance by its investment funds and new product expansion efforts support further asset management net flows, something we underestimated.”

Lehr said it was likely that the Insignia board views the updated proposals from Bain and CC Capital positively as the $4.60 offer is roughly 50% above Insignia’s share price before the announcement on 12 December.

“This could appeal to long-term shareholders seeking an exit. The deal offers shareholders a smoother exit while avoiding Insignia’s various execution risks, such as required transformation investments, potential increases in remediation payments, and competition from faster-growing platforms.”