Millfield in £70m deal to create biggest IFA

Millfield and Inter-Alliance, two of the country's largest independent financial advisers, announced plans for a £70m merger yesterday, in a move which will create the country's biggest IFA with more than 1,850 advisers.

The deal, which has been unanimously recommended by both boards, and now remains only subject to regulatory approval, is one of the largest in the latest round of consolidation in the IFA sector.

A series of IFAs has moved to expand through acquisition over the past two years, in an attempt to gain scale ahead of the sweeping regulatory changes which will hit the industry later this year.

These will see the abolition of so-called "polarisation", where advisers must be either independent or tied to one company. Under the rules, polarisation will be scrapped, allowing a new breed of adviser to emerge, who is tied to a handful of providers.

Bradford & Bingley is currently the largest IFA. However, it has already elected to sell part of its advisory business, Charcol, before the end of the year, and says it is now committed to making the transfer to "multi-tied" status.

In contrast, the Millfield/ Inter-Alliance partnership, which will run under the name Millfield Group, is to keep its "independent" tag - something it hopes will continue to be valued by customers in search of financial advice.

The offer is being made on the basis of five new Millfield shares for every 236 Inter-Alliance shares. Millfield shares closed down 36 per cent at 41p on the news, giving the company a market value of £40m. Inter-Alliance shares closed up 0.3p at 0.88p, giving the company a value of £8m.

About £15m of loans for integration has been secured for the deal from Axa, Friends Provident, Prudential, Scottish Widows and Skandia.

Keith Carby, the chairman of Inter-Alliance, said: "We are delighted with the support the merger has received from these five leading product providers which is a further endorsement of our strategy and the excellence of our people. Scale and independence are two of the key ingredients that are essential to be able to deliver value and service for all our stakeholders."

Paul Tebbutt, Millfield's chief executive, said: "We are creating a financial services distribution company with the scale, financial resources, technology and team required in the new economic, political and regulatory environment in which we now operate. The new Millfield Group will be the largest national independent financial adviser in the UK."