Rathbone Brothers Rathbone Brothers Plc : Acquisition
June 14 2018 - 2:00AM
UK Regulatory
TIDMRAT
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO
WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
14 June 2018
Rathbone Brothers Plc
Acquisition of Speirs & Jeffrey Limited
Summary
-- Acquisition of Speirs & Jeffrey, Scotland's largest independent wealth
manager with funds under management of GBP6.7bn[1] #_ftn1
-- Increases Rathbones' pro forma funds under management by 18% to
GBP44.5bn[2] #_ftn2
-- Initial consideration of GBP104m comprising GBP79m cash (funded from a
combination of internal cash resources and the proceeds of a proposed
GBP60m equity placing separately announced this morning) and the issue of
1.0m new Rathbones shares worth GBP25m
-- Further contingent consideration, earn-out payments and incentivisation
awards of up to 5.8m Rathbones shares may also be payable depending upon
the achievement of synergies that deliver additional earnings accretion
-- Expected underlying EPS accretion of at least 8% and return on investment
of approximately 13% in the third year following completion; the
transaction is further expected to be marginally EPS accretive on an
underlying basis in the first full year following the acquisition
The board of Rathbone Brothers Plc ("Rathbones") today announces that it
is to acquire 100% of the issued share capital of Speirs & Jeffrey
Limited ("Speirs & Jeffrey"), Scotland's largest independent wealth
manager with funds under management of GBP6.7bn and 38 investment
professionals, from the shareholders of Speirs & Jeffrey, all of whom
are working executive directors of the business.
Speirs & Jeffrey has operated as an independent investment management
firm for over a century and has established many long term client
relationships, with nearly three quarters of clients having been with
the company for over 10 years. All of Speirs & Jeffrey's current
directors and investment managers will be joining Rathbones and Speirs &
Jeffrey CEO Russell Crichton will become the Head of Rathbones' Scottish
business. Rathbones' Glasgow team will combine with Speirs & Jeffrey to
consolidate Rathbones' existing Glasgow presence.
Speirs & Jeffrey shares a strong cultural alignment with Rathbones,
particularly in relation to its investment process and proposition.
Speirs & Jeffrey's c.8,500 clients will benefit from access to
Rathbones' broader product and service offering including lending,
financial planning and dedicated specialist offerings such as Rathbones'
charities team and ethical investment capability. Speirs & Jeffrey's
clients will see continuity of their investment manager and will benefit
from the support of and access to Rathbones' deeper research resources,
front office investment systems, wider platform and the provision of an
enhanced investment process.
Rathbones is a leading consolidator within the wealth management
industry, with a long track-record of successful acquisitions of
culturally aligned businesses with a shared focus on their clients and
people. In line with its stated strategy, Rathbones has been growing its
core private client discretionary investment management business both
organically and by acquisition. The acquisition of Speirs & Jeffrey will
enable Rathbones to establish a much stronger presence in Scotland, with
Glasgow becoming the Group's largest office after London following the
transaction. The transaction will also further enhance Rathbones'
position as one of the UK's largest wealth managers with pro-forma funds
under management of GBP44.5bn. This will allow the enlarged entity to
capture further scale benefits from ongoing investment in technology and
the management of regulatory change for the benefit of its clients,
staff and shareholders.
Under the terms of the transaction, Rathbones will pay an initial cash
and share consideration of GBP104m. Further contingent consideration of
0.6m Rathbones shares will be payable dependent upon meeting certain
administrative and procedural targets that enable the delivery of cost
synergies. Earn-out consideration and incentivisation awards of up to a
maximum of a further 5.2m([3] #_ftn3) shares will only be payable as
operational and financial performance targets are delivered over the
medium term.
The Board of Rathbones expects:
-- underlying EPS accretion of at least 8%[4] #_ftn4 and return on
investment of approximately 13% in the third year following completion;
-- the transaction to be marginally EPS accretive on an underlying basis in
the first full year following the acquisition;
-- to achieve run-rate cost synergies of approximately GBP6m per annum
within three years, principally from the streamlining of operations and
infrastructure, with a total of approximately GBP3m costs to achieve
these synergies over three years following completion; and
-- meaningful revenue synergies to be achieved over time by leveraging the
strength of Rathbones' brand and complementary product offering and
aligning the Speirs & Jeffrey service proposition with that of Rathbones.
Philip Howell, CEO of Rathbones said:
"From the outset of our engagement, both teams have recognised how
compatible they are in culture, investment philosophy and dedication to
client service. Speirs & Jeffrey represents an ideal strategic,
professional and geographic fit with Rathbones and we look forward to
working together both to develop our business in Scotland and deliver
compelling returns for our shareholders. Key to our combined future
success will be the principle of putting clients at the forefront of
what we do, and we will remain committed to this as we welcome Speirs &
Jeffrey into the Group."
Russell Crichton, CEO of Speirs & Jeffrey, said:
"My colleagues and I have long admired Rathbones, and everything we
experienced during our discussions has merely strengthened our
conviction that it offers the very best fit for our clients and our
people. With our client-facing staff members committed to and
enthusiastic about the future, clients will continue to enjoy the high
level of personal service which has become the hallmark of our firm, but
with the additional significant benefits of Rathbones' scale, specialist
expertise and deeper capabilities. We are all excited about our
partnership with Rathbones and the opportunities this new chapter in our
history will provide." Graham Waddell, Chairman, added: "This represents
a significant milestone for S&J but undoubtedly the right one for our
clients and our people. The fact that our team will remain intact and
that our clients will continue to receive the same exacting standards of
personal service, whilst benefitting from the wider resources of
Rathbones, fills me with great confidence for the future."
The acquisition is subject to approval by the FCA and is expected to
complete in the third quarter of 2018.
Key financial metrics relating to Speirs & Jeffrey(5)
Year to 10 May 2017 Year to 10 May 2018
(Audited statutory accounts) (Unaudited management accounts)
Revenue GBP25.3m GBP28.0m
Underlying
profit before
tax GBP9.1m GBP10.6m
Underlying
profit before
tax margin 36% 38%
Profit after GBP7.2m GBP8.2m
tax
(reported)
Gross assets GBP37.2m GBP31.9m
Total FUM GBP6.4bn GBP6.7bn
Discretionary GBP2.3bn GBP2.7bn
FUM
Advisory FUM GBP3.5bn GBP3.3bn
Execution GBP0.6bn GBP0.7bn
only/other
FUM
-- Based on Speirs & Jeffrey's unaudited management accounts for its most
recent financial year ended 10 May 2018, the initial consideration of
GBP104m equates to 12.6x profit after tax and 1.6% of FUM.
Detail on the total maximum amounts payable in relation to the
transaction
-- The total maximum amounts payable in relation to the transaction are:
-- Initial cash and share consideration amounting to GBP104m
structured as GBP79m in cash and GBP25m (1.0m new Rathbones
shares[6] #_ftn6 ) payable at completion. Such shares will be
locked up for 3 years from completion and will be subject to
ongoing employment conditions for the sellers;
-- Contingent consideration of 0.6m new Rathbones shares[7] #_ftn7 ,
with an illustrative value of GBP15.0m7 conditional upon meeting
certain administrative and procedural targets that enable the
delivery of cost synergies. This will be subject to ongoing
employment conditions for the sellers; and
-- Earn-out payments and incentivisation awards (totalling up to a
maximum of 5.2m[8] #_ftn8 Rathbones shares, with an illustrative
value of c.GBP129m[9] #_ftn9 )
-- earn-out payments are payable to the sellers in the third
and fourth years following completion for value creation
from revenue synergies and discretionary funds growth
-- incentivisation awards are expected to be granted to
investment management and certain operational employees in
the third and fourth years following completion for the
delivery of operational and financial performance targets.
The majority of these will be subject to a subsequent three
year vesting period
-- these mechanisms aim to reward the incremental delivery of
EPS accretion and return on investment
-- Whilst a maximum of 5.2m shares can be payable, the Board's
current underlying EPS accretion and return on investment
expectations are based on a materially lower total. If a
higher number of shares are payable then these measures
will increase correspondingly.
-- Approximately 95% of the aggregate expected initial share consideration,
contingent consideration, earn-out payments and incentivisation awards is
contingent on continued employment of the recipient, and therefore will
be charged to profit or loss over the required employment period in
accordance with IFRS 3. The balance of consideration will be capitalised.
Conference call and investor presentation details
An analyst and investor conference call will be held at 8:00 a.m. today.
UK: 08006940257
International: +44 (0) 1452 555566
Participants should quote the conference code '1778968' to join the
call.
Participants will be able to access the presentation slides from 7:00
a.m. today by going to the Investor Relations section of Rathbones'
website using the following link:
http://www.Rathbones.com/investor-relations
The information contained in this announcement is inside information as
stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon
publication of this announcement, this inside information is now
considered to be in the public domain. The person responsible for
arranging this announcement on behalf of Rathbones is Ali Johnson,
Company Secretary.
Enquiries:
Rathbone Brothers Plc
Philip Howell, Chief Executive
Paul Stockton, Finance Director / Designate Managing
Director, RIM
Shelly Patel, Head of Investor Relations +44 (0) 20 7399 0000
RBC Capital Markets (Financial Adviser and Joint Corporate
Broker to Rathbones)
Oliver Asplin Hearsey
Kevin Smith
Marcus Jackson
Paul Lim +44 (0) 20 7653 4000
Peel Hunt (Joint Corporate Broker to Rathbones)
Adrian Haxby
Roger Lambert
Guy Wiehahn +44 (0) 20 7418 8900
Camarco (Communications Adviser to Rathbones)
Ed Gascoigne-Pees
Hazel Stevenson +44 (0) 20 3757 4984
Spencer House Partners LLP (Financial Adviser to Speirs
& Jeffrey)
Andrew Malcolm
Alexander Fellowes +44 (0) 20 7647 8567
IMPORTANT NOTICES
RBC Europe Limited is authorised by the Prudential Regulation Authority
and regulated in the United Kingdom by the Financial Conduct Authority
(the "FCA") and the Prudential Regulation Authority, is acting for the
Company in connection with the Acquisition and no-one else and will not
be responsible to anyone other than the Company for providing the
protections afforded to clients of RBC Europe Limited nor for providing
advice in relation to the Acquisition or any other matter referred to in
this Announcement.
Peel Hunt LLP, which is authorised and regulated in the United Kingdom
by the FCA, is acting for the Company in connection with the Acquisition
and no-one else and will not be responsible to anyone other than the
Company for providing the protections afforded to clients of Peel Hunt
LLP nor for providing advice in relation to the Acquisition or any other
matter referred to in this Announcement.
This Announcement is for information purposes only and shall not
constitute an offer to sell or issue or the solicitation of an offer to
buy, subscribe for or otherwise acquire securities in any jurisdiction
in which any such offer or solicitation would be unlawful. Any failure
to comply with this restriction may constitute a violation of the
securities laws of such jurisdictions.
This Announcement may contain "forward-looking statements" with respect
to certain of the Company's plans and its current goals and expectations
relating to its future financial condition, performance, strategic
initiatives, objectives and results. Forward-looking statements
sometimes use words such as "aim", "anticipate", "target", "expect",
"estimate", "intend", "plan", "goal", "believe", "seek", "may", "could",
"outlook" or other words of similar meaning. By their nature, all
forward-looking statements involve risk and uncertainty because they
relate to future events and circumstances which are beyond the control
of the Company, including amongst other things, domestic and global
economic business conditions, market-related risks such as fluctuations
in interest rates and exchange rates, the policies and actions of
governmental and regulatory authorities, the effect of competition,
inflation, deflation, the timing effect and other uncertainties of
future acquisitions or combinations within relevant industries, the
effect of tax and other legislation and other regulations in the
jurisdictions in which the Company and its respective affiliates operate,
the effect of volatility in the equity, capital and credit markets on
the Company's profitability and ability to access capital and credit, a
decline in the Company's credit ratings; the effect of operational
risks; and the loss of key personnel. As a result, the actual future
financial condition, performance and results of the Company may differ
materially from the plans, goals and expectations set forth in any
forward-looking statements. Any forward-looking statements made in this
Announcement by or on behalf of the Company speak only as of the date
they are made. Except as required by applicable law or regulation, the
Company expressly disclaims any obligation or undertaking to publish any
updates or revisions to any forward-looking statements contained in this
Announcement to reflect any changes in the Company's expectations with
regard thereto or any changes in events, conditions or circumstances on
which any such statement is based.
Neither the content of the Company's website nor any website accessible
by hyperlinks on the Company's website is incorporated in, or forms part
of, this Announcement.
([1] #_ftnref1) As at 10 May 2018
([2] #_ftnref2) Based on Rathbones FUM as at 5 April 2018 and Speirs &
Jeffrey FUM as at 10 May 2018; includes execution only
([3] #_ftnref3) If the conditions for the contingent consideration are
not achieved by 31st December 2019, the maximum number of shares under
the earn-out and incentivisation awards will increase by 0.6m Rathbones
shares
([4] #_ftnref4) Based on 2021 consensus expectations, derived from
applying consensus 2019-2020 growth rate to 2020 market forecasts
([5] #_ftnref5) 2018 figures are based on latest unaudited financial
information per management accounts. 2017 figures are based on audited
financial information. Underlying profit before tax for the year ended
10 May 2018 is stated before deduction of office fit-out costs of
GBP0.1m and deal related costs of GBP0.3m. Underlying profit before tax
for the year ended 10 May 2017 is stated before deduction of
non-recurring professional services costs of GBP0.1m
([6] #_ftnref6) The number of shares is calculated based on the average
share price over the ten day period prior to 14 June 2018
([7] #_ftnref7) The number of shares is fixed and illustrative value is
calculated based on average share price over the ten day period prior to
14 June 2018
([8] #_ftnref8) The number of shares is capped at 5.2m shares. If the
conditions for the contingent consideration are not achieved by 31st
December 2019, the maximum number of shares under the earn-out and
incentivisation awards will increase by 0.6m Rathbones shares
([9] #_ftnref9) Illustrative value is calculated based on average share
price over the ten day period prior to 14 June 2018
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Rathbone Brothers Plc via Globenewswire
http://www.rathbones.com/
(END) Dow Jones Newswires
June 14, 2018 02:00 ET (06:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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