Listing on the Australian Securities Exchange (ASX) will increase Steadfast’s strategic and capital flexibility, giving greater capacity to raise funds for growth, the company says in documents outlining its proposed restructure.

The benefits of listing include having shares that can be traded on the ASX, while shareholders will gain an interest in a larger, more diversified company, it says.

It will also help brokers’ succession planning by creating a company that can acquire and invest in their businesses, according to papers lodged with the Australian Securities and Investments Commission.

Broker shareholders’ interests will change from the current shareholder-based arrangement to a contractual one – separate from any shareholding in Steadfast – under the complex restructuring plan that will be put to an extraordinary general meeting (EGM) on June 14.

Steadfast brokers will also get a priority share offer.

The change from being owner-managers to employees makes some investment analysts wonder whether brokers will have the same commitment to the business.

“I think there will be quite a bit of interest in this float,” one analyst told insuranceNEWS.com.au. “It is a good board, with very experienced, well-known people.

“The shares will be fully franked with a payout ratio of 65% to 85%, so there will be interest in that.

“My one concern is whether they will they keep the brokers who are currently running their own businesses. Will they stay as interested when they are employees?”

Steadfast hopes to list at the end of next month or early August with earnings before interest, tax and amortisation (EBITA) of at least $35 million. It has set a $1 floor price on the shares.

It is in negotiations to buy stakes in 60 to 70 target brokers and related service companies, which will contribute about $27.6 million of the target EBITA; the group has already acquired $3.4 million of that.

Steadfast will pay for the acquisitions with cash and possibly share issues, which will result in substantial intangible assets on its balance sheet from values given to goodwill.

But there are a number of hurdles to clear before listing proceeds, and the documents warn there are risks.

There is uncertainty about the number and scale of target acquisitions, and they will not proceed if listing fails. Failure to gain shares in enough targets could sink the float.

Once listed, a significant portion of Steadfast’s revenue will come from dividends in the targets, most of which it will not control.

New shareholders’ interests could differ from those of current shareholders, particularly if the number of non-broker shareholders increases. Steadfast acknowledges that because brokers will not be required to hold shares, their interests may become less aligned with those of the company.

Rebates paid to current shareholders will be reduced, but there is no guarantee this will be offset by share dividends.

The EGM will be asked to approve non-executive directors’ fees of $900,000 a year from July 1 and interest-free loans for executives to buy shares: $5 million to CEO Robert Kelly, $4 million to COO Cameron McCullagh, $1 million to CFO Stephen Humphrys and $900,000 to EGM Allan Reynolds. The loans must be repaid within five years.

Analysts say the group has a very tight timeframe in which to meet the ASX’s stringent requirements for a July or August debut.

In an environment where there will be many opportunities and some potential downsides to consider, Steadfast brokers and prospective shareholders will have plenty of reading material to pore over during the next few weeks.