TIDMRAT
RNS Number : 9021C
Rathbone Brothers PLC
23 June 2021
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
23 June 2021
Rathbone Brothers Plc
Acquisition of Saunderson House
Summary
-- Acquisition of Saunderson House, the largest professional
services-focused financial planning business in the UK with
GBP4.7bn of FUMA
-- Further strengthens Rathbones' financial planning capability,
enhancing its ability to offer a wider wealth proposition to HNW
and UHNW clients, and adding scale to financial planning FUMA
totalling GBP8.3 billion on a pro forma basis
-- Delivers a meaningful growth opportunity in highly attractive
market segments focused on HNW professional clients
-- Offers a strong cultural fit, with both businesses resolutely
focused on delivering a quality service and positive outcomes for
clients over the long term
-- Supports Rathbones' strategy to enhance propositions to service growing specialist markets
-- Reinforces Rathbones' UK wealth management industry standing,
increasing pro forma FUMA to c.GBP61bn
-- Total consideration of GBP150.0m[1] comprising initial
consideration of GBP135.1m (GBP130.2m cash and GBP4.9m in new
shares) and GBP14.9m deferred consideration
-- Rathbones has agreed to pay up to GBP7.5m in employee
incentive plan awards aligned to the value creation of the
transaction by the end of 2024
-- Funded from internal cash resources and a proposed GBP50.0m
placing separately announced today
-- Expected underlying EPS accretion of approximately 10% and
return on investment of approximately 12% in the third year
following completion; the transaction is expected to be 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 CastleCo
Limited, the holding company of the Saunderson House group
("Saunderson House"), subject to regulatory approval. Saunderson
House is the largest professional services-focused financial
planning business in the UK with GBP4.7bn of FUMA, c.2,200 clients
and 55 financial advisers.
Saunderson House is a UK-based advice-led wealth management
business, with a focus on professional services clients in London
and the South East. It provides tailored services to accountants
and lawyers with long-standing relationships with large accountancy
firms and leading law firms in particular. Saunderson House serves
c.2,200 high net worth clients with an average portfolio size of
GBP2.2m and typically complex financial affairs. Saunderson House
employs talented adviser teams, providing high-quality advice and
exceptional client service. Its long-term client relationships are
founded on its ability to offer financial planning and investment
solutions that can be tailored to the needs of professional
services partners who are required to adhere to complicated
portfolio compliance requirements.
Rathbones is a leader within the UK wealth management industry,
with a long track-record of successful acquisitions. Shared values,
cultural alignment and focus on client outcomes are principles at
the heart of Rathbones' acquisition strategy and these will build
firm foundations for welcoming Saunderson House into the group
where its employees and clients will now have a long-term home.
Saunderson House and its clients are expected to benefit from
access to the strength and depth of Rathbones' investment
management capability and the expertise and range of investment
solutions available across its private client, Greenbank and funds
operations. This will support both positive client outcomes and
future growth.
The acquisition of Saunderson House further strengthens
Rathbones' financial planning capability and enhances its ability
to offer a more holistic wealth management proposition to clients
when appropriate. Saunderson House advisers also increase
Rathbones' capacity to provide financial planning to existing
Rathbones Investment Management ("RIM") clients where there is
untapped latent demand for high-quality in-house financial
planning.
There is an increasing demand for financial advice in the UK
market driven by a number of factors including: pension freedoms
and the complexity of associated options; the responsibility for
retirement planning increasingly being passed to individuals as a
result of the decline in Defined Benefit pension schemes; and the
creation and increased promotion of tax wrappers.
In accessing the financial advice market, Rathbones offers
dynamic services that both support client relationships with
investment managers, and allow flexibility in the way they work
with financial advisers whether internal or external to the group.
Rathbones offers holistic wealth solutions, direct investment-led
services to clients and advisers, as well as complementary
risk-targeted and single-strategy funds. Rathbones also operates
the Vision Financial Planning group ("Vision"), an independent
adviser network in the UK with GBP2.3bn of FUMA.
The acquisition of Saunderson House further strengthens
Rathbones' financial planning capability, increasing the number of
in-house financial planners from 25 to 80. Pro forma FUMA will
increase from GBP3.7bn to GBP8.3bn, and we expect that strong
demand for high-quality financial planning will further drive
organic growth across the group and present a meaningful growth
opportunity in the highly attractive HNW professional clients
sector . Vision will continue to operate independently, remaining
an important part of the group as it continues to grow its adviser
footprint in the UK and widen its service offerings.
The transaction reinforces Rathbones' wealth management industry
standing, increasing pro forma FUMA to c.GBP61bn, making it the
third largest wealth manager in the UK.
Under the terms of the transaction, total consideration of
GBP150.0m 1 will be payable to funds advised by Epiris LLP and the
management and employees of Saunderson House. This will comprise
initial cash and share consideration amounting to GBP135.1m,
including the repayment of debt, structured as GBP130.2m in cash
and GBP4.9m in new Rathbones shares payable at completion. The
initial cash consideration will be funded from a combination of
internal cash resources and the proceeds of a proposed GBP50.0m
placing (representing c.5% of Rathbones' issued share capital)
separately announced today. The initial share consideration will be
locked up for three years from completion and will be subject to
ongoing employment conditions for the management and employee
sellers.
Rathbones has also agreed to pay deferred consideration of
GBP14.9m on the first anniversary of completion. This will comprise
GBP10.9m in cash and GBP4.0m to be issued by way of new Rathbones
shares. Key employees will also be eligible to participate in an
employee incentive plan with a value of up to GBP7.5m based on
achieving growth and operational targets aligned to the value
creation of the transaction by the end of 2024. These mechanisms
aim to reward the incremental delivery of EPS accretion and return
on investment.
The Board of Rathbones expects:
-- underlying EPS accretion of approximately 10% and return on
investment of approximately 12% in the third year following
completion;
-- the transaction to be EPS accretive on an underlying basis in
the first full year following the acquisition;
-- attractive revenue synergies from: aligning the Saunderson
House service proposition with that of Rathbones; leveraging the
strength of Rathbones' brand and platform to drive further
origination; and the continued trend of clients converting from an
advisory mandate to discretionary arrangements;
-- cost synergies from the streamlining of operational processes
having taken advantage of the best of the combined skills and
capabilities of both companies;
-- delivery of synergies to be phased over time to maintain
operational stability and quality of service throughout the
transition; and
-- capital levels to continue to remain robust incorporating a
management buffer and providing sufficient capital for further
small acquisitions in a consolidating market.
Paul Stockton, CEO of Rathbones said:
"Saunderson House is a high-quality business with a strong
desire to deliver leading wealth management services to clients
over the long term, and it will add both scale and capability to
Rathbones. Commonly shared values and a resolute focus on
delivering quality client outcomes provide a firm foundation from
which to take advantage of some exciting growth opportunities. I
very much look forward to welcoming everyone at Saunderson House to
the Rathbones group as we work to exceed our ambitions
together."
Tony Overy, CEO of Saunderson House, said:
"Over the course of extensive recent engagement between
Saunderson House and Rathbones, it has become clear to us that
there is a high level of cultural alignment between our two
businesses; both have been built on serving clients to the highest
standards and building enduring relationships based on trust and
integrity. By doing this over many years we have each built a
high-quality business with very loyal and satisfied clients. I am
absolutely delighted with our decision to partner with Rathbones
which I believe will allow us to continue doing exactly this, with
access to Rathbones' significant additional investment management
capability and market-leading investment process. This transaction
provides long-term ownership stability for Saunderson House to
enable us to continue to focus on providing our high level of
client service, developing and enhancing our proposition, and
providing an excellent environment for our people as part of a
well-respected and well-capitalised group."
The acquisition is subject to approval by the FCA and is
expected to complete in the third quarter of 2021.
Rathbones is being advised by RBC Capital Markets (Financial
Adviser and Joint Corporate Broker) and Addleshaw Goddard (Legal
Adviser) in relation to the transaction. Saunderson House is being
advised by Fenchurch Advisory Partners (Financial Adviser) and
Macfarlanes (Legal Adviser).
Key financial metrics relating to Saunderson House
FY Dec-20
FUMA GBP4.7bn
Revenue GBP34.7m
Operating Profit GBP6.0m
Operating Profit Margin 17%
Revenue Margin 0.72%
Gross Assets GBP20.6m
---------
Conference call and investor presentation details
An analyst and investor conference call will be held at 5:30
p.m. today.
UK: 0800 528 0983
North America: 800 741 8620
Participants should quote the conference code '21995596' to join the call.
Participants will be able to access the presentation slides
under the 'Investor and Strategy Presentations' tab at the
following link:
https://www.rathbones.com/investor-relations/results-and-presentations
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 +44 (0) 20 7399 0000
Paul Stockton, Chief Executive
Jennifer Mathias, Finance Director
Shelly Patel, Head of Investor Relations
RBC Capital Markets (Financial Adviser and Joint Corporate
Broker to Rathbones) +44 (0) 20 7653 4000
Oliver Asplin Hearsey
Marcus Jackson
Paul Lim
Elliot Thomas
Peel Hunt (Joint Corporate Broker to Rathbones)
+44 (0) 20 7418 8900
Andrew Buchanan
Rishi Shah
John Welch
Jock Maxwell Macdonald
Camarco (Communications Adviser to Rathbones)
+44 (0) 20 3757 4984
Ed Gascoigne-Pees
Julia Tilley
IMPORTANT NOTICES
RBC Europe Limited is authorised by the Prudential Regulation
Authority (the "PRA") and regulated in the United Kingdom by the
Financial Conduct Authority (the "FCA") and the PRA, and 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] Before a locked box adjustment mechanism with an additional
impact of GBP3.4m for excess net working and regulatory capital.
With the locked box adjustment, the initial consideration increases
to GBP138.5m comprised of GBP133.2m cash and GBP5.3m in new shares.
Initial consideration includes repayment of GBP45.0m debt.
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END
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