Inside Money: Would you pay $9 million for the catch of the day?

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Regular readers of Inside Money were aware, of course, as far back as early February that the Huljich KiwiSaver scheme was for sale so wouldn't have been surprised to see the news of its impending takeover by Fisher Funds.

There are some formalities to be observed before the deal goes through with the Government Actuary having to sign off that Huljich members will not be any worse off by transferring to Fisher.

Huljich members will not be compelled to shift to Fisher, they can change at any time and, I think, lodge objections to the proposal. My bet is that most won't bother to protest; apathy still rules in KiwiSaver.

A quick comparison of the two schemes on the Workplace Savings NZ website reveals a wide disparity in the member profiles of Fisher and Huljich as at the end of last year:

• Fisher - $201 million under management, 19,750 members, average balance per member $10,177;

• Huljich - $181.83 million under management, 92,750 members, average balance per member $1,960.

Other KiwiSaver providers have, unkindly, described the Huljich 'book' as being of lower quality, ie full of poor people, prone to taking contribution holidays and generally just not earning enough to be worth the bother. But Fisher wasn't the only one in the Huljich hunt - Tower was there amongst others - so there must be value somewhere.

Fisher and Huljich have been coy on the purchase price but there's a couple of ways to guess.

Using the rule of thumb that you pay about 3 per cent of funds under management then Huljich would've been worth about $5.5 million. That sounds a bit low to me, though.

Here's my guess based on info gleaned from previous KiwiSaver takeovers, where providers have paid up to $100 per member.

Assuming every Huljich member joins Fisher, at the top rate of $100 each that equates to over $9 million. The real answer, as always, will probably be somewhere in-between.

However, Fisher will be buying some guaranteed cashflows with admin fees alone from the full Huljich membership pulling in over $2 million annually (based on the Fisher $2 per month -Huljich charges $3). Throw in a management fee of about 1 per cent and the odd performance fee (which both Fisher and Huljich favour) then $9 million might be a bargain.