MALLESONS Stephen Jaques has acted for Challenger Financial Services Group on the $385 million sale of its mortgage aggregation businesses to National Australia Bank.

The deal includes the sale of mortgage aggregation businesses Plan, Fast and Choice, as well the multi=branded origination business. It also includes the sale to NAB of a 41 per cent stake in the listed mortgage origination company, Homeloans Ltd, which is now subject to Homeloans shareholder approval.

Mallesons' lead partner on the transaction, Tim Bednall, said the transaction was a complicated one, requiring closure in an "extremely tight" timeframe.

"It involved a complex securitisation business with retail mortgage broking elements and a range of intellectual property issues to manage," he said.

In an interview with The New Lawyer, Bednall said Challenger had been conducting a sale process and the likelihood of a transaction with NAB became evident on Thursday night, last week. "We signed on Monday night. So it was a really quite turnaround, and we didn't get much sleep over that period."

The work called for a Mallesons team comprising not just of M&A lawyers but securitisation and finance lawyers, tax lawyers, and IP was a significant factor because challenger had developed a lot of systems software for running these businesses that was quite unique, Bednall said.

"So there was a big software component. And there were the usual employment law issues and those sorts of things. So a large number of Challenger employees will go to NAB under this arrangement."

Challenger is a long-time Mallesons client. The firm advised the company over the past few years as it bought into mortgage broking and mortgage aggregation businesses. "So we had a long history with the business," said Bednall.

The firm, and its top-tier counterparts, are seeing a lot of this work, said Bednall. "It's the bread and butter of  corporate practices of firms like ours. But we're seeing a lot of this type of negotiated non-public M&A transaction."

Challenger CEO Dominic Stevens said: “Challenger is looking forward to taking advantage of significant strategic opportunities that exist in the retirement income and investment management markets."

The changing markets have given the company a chance to rethink its opportunities, Stevens said.

"Whilst we are very proud of our history and performance within the mortgage industry, the changing dynamics of that market has meant that the significant capital tied up in the business will be better refocused into growth opportunities within the organisation’s other divisions”.

There are not many of these types of businesses around, though there has been recent activity in the sector, said Bednall. "Aussie home loans bought the Wizard mortgage business recently. There have been others. The Commonwealth Bank now owns 33 per cent of Aussie home loans, a separate mortgage business. So there has been quite a lot of activity in the sector," he said.

This sort of transaction has been in part brought about by economic circumstances, said Bednall. "I think the sale of Wizard home loans to Aussie was certainly brought about by economic circumstances. I think that's certainly been an influence."

The transaction, which is subject to regulatory approvals, is expected to close by 31 October 2009.