TIDMRAT TIDMINVP
RNS Number : 2364V
Rathbones Group PLC
04 April 2023
FOR IMMEDIATE RELEASE
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
THAT JURISDICTION
THIS IS AN ANNOUNCEMENT AND NOT A CIRCULAR OR PROSPECTUS OR
EQUIVALENT DOCUMENT AND INVESTORS AND PROSPECTIVE INVESTORS SHOULD
NOT MAKE ANY INVESTMENT DECISION ON THE BASIS OF ITS CONTENTS. A
COMBINED CLASS 1 CIRCULAR AND PROSPECTUS IN RELATION TO THE
COMBINATION DESCRIBED IN THIS ANNOUNCEMENT WILL BE PUBLISHED IN DUE
COURSE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
4 April 2023
Rathbones announces combination with Investec Wealth &
Investment UK
to create the UK's leading discretionary wealth manager
The Boards and Management of Rathbones Group Plc ("Rathbones" or
the "Company") and Investec PLC ("Investec Group") are pleased to
announce that they have entered into a definitive agreement
regarding an all-share combination of Rathbones with Investec
Wealth & Investment Limited ("Investec W&I UK") to create
the UK's leading discretionary wealth manager (the "Enlarged
Rathbones Group") (the "Combination").
The Combination brings together two trusted and prestigious UK
wealth management businesses with closely aligned cultures and
operating models and a shared commitment to client-centric values
and sustainable growth. The Combination represents a significant
value creation opportunity for both Rathbones and Investec Group
shareholders.
Under the terms of the Combination, new Rathbones shares will be
issued in exchange for 100% of Investec W&I UK's share capital.
The Enlarged Rathbones Group will remain an independent
premium-listed company operating under the Rathbones brand with
Investec Group as a long-term, strategic shareholder. Following
completion, Investec Group will have an economic interest in
Rathbones' enlarged share capital of 41.25% with Investec Group's
voting rights limited to 29.9% of Rathbones' enlarged total voting
rights. Existing Rathbones shareholders will have an economic
interest of 58.75% and voting rights of 70.1%. The terms of the
Combination imply an equity value of approximately GBP839 million
for Investec W&I UK.
The Investec W&I UK transaction perimeter includes Investec
Group's wealth and investment businesses in the UK and Channel
Islands but excludes Investec Bank (Switzerland) AG and Investec
Wealth & Investment International (Pty) Ltd, both of which will
remain wholly-owned subsidiaries of Investec Group.
The Combination constitutes a Class 1 acquisition for Rathbones
for the purpose of the Listing Rules ("Listing Rules") and is
therefore subject to, among other things, shareholder and
regulatory approvals.
Key highlights
The Boards of Rathbones and Investec Group believe that the
Combination will unlock significant scale benefits through the
creation of the UK's leading discretionary wealth manager with
approximately GBP100 billion of funds under management and
administration ("FUMA").
In particular, the Boards of Rathbones and Investec Group
believe that the Combination will:
-- enhance and enrich the client proposition across investment
management, financial planning, fund management and banking
services;
-- create a leading multi-channel distribution capability across
private clients, intermediaries and charities, through an expanded
network in 23 locations across the UK and Channel Islands;
-- attract and retain the best industry talent through a leading employee proposition;
-- leverage Rathbones' investment in technology and operating
model to deliver an optimal client experience whilst improving
operating efficiency across the larger combined business;
-- deliver significant value creation through the strong fit
between the two operating models, with target annual run-rate cash
synergies of at least GBP60 million, driven primarily by cost
savings as well as higher net interest income;
-- generate attractive financial returns for Rathbones : (i)
expected to be accretive to underlying EPS in the first full year
following completion; (ii) targeting low-teens underlying EPS
accretion in the third full year following completion; and (iii)
targeting double-digit post-tax return on invested capital in the
third full year following completion;
-- support the Enlarged Rathbones Group in maintaining a
resilient capital position through all-share consideration with
earnings accretion underpinning its progressive dividend policy;
and
-- establish a long-term strategic partnership between Rathbones
and Investec Group to leverage attractive collaboration
opportunities.
Investec Group will become a strategic shareholder in the
Enlarged Rathbones Group and, on completion, will enter into a
relationship agreement. The relationship agreement will include
customary arm's length provisions as well as lock-up and standstill
arrangements as described in the section below headed "Other Key
Combination Terms".
Benefits to Investec Group
The Combination also offers a number of strategic and financial
benefits for Investec Group, including:
-- re-affirming Investec Group's commitment, in a
capital-efficient manner, to the strategically attractive UK wealth
management sector, where scale and technology are increasingly
important to drive growth and value creation;
-- establishing a long-term strategic partnership between the
Enlarged Rathbones Group and Investec Group, which will enhance the
client proposition across banking and wealth management services
for both groups;
-- increasing the contribution of capital-light, recurring
earnings to Investec Group, with distributions to Investec Group
supported by a progressive Enlarged Rathbones Group dividend
policy; and
-- creating sustainable value for Investec Group's shareholders.
Financial Outlook for the Enlarged Rathbones Group
The benefits of the Combination reinforce Rathbones' conviction
in the attractive medium-term growth outlook for the business. In
particular, the Enlarged Rathbones Group will:
-- continue to target an underlying operating margin in the low
20s (%) in 2023 and return to the high 20s (%) in 2024 as outlined
in the 31 December 2022 financial year results; and
-- target an underlying operating margin of 30% or more in the
medium-term, once the benefits of the Combination are realised.
Other Key Combination Terms
Transaction structure
Under the terms of the Combination, Rathbones will, in
consideration for the transfer of the entire issued share capital
of Investec W&I UK, issue to Investec Group at completion: (i)
Rathbones ordinary voting shares representing 29.9% of Rathbones'
enlarged ordinary voting share capital; and (ii) Rathbones
convertible non-voting ordinary shares, such that Investec Group
will have an economic interest in the Enlarged Rathbones Group of
41.25% (together, the "Consideration Shares").
The convertible non-voting ordinary shares will rank pari passu
with the Rathbones ordinary shares save that they will not carry
voting rights. At any time following completion, Investec Group may
convert convertible non-voting ordinary shares into ordinary shares
on a 1-for-1 basis provided that at no time shall Investec Group
hold more than 29.9% of Rathbones' enlarged voting rights. The
convertible non-voting ordinary shares will not be listed and will
be non-transferable.
The convertible non-voting ordinary shares are expected to
qualify as common equity tier 1 capital when issued on completion
(subject to regulatory approval).
Under the Listing Rules, the Combination represents a Class 1
acquisition for Rathbones (and so will require the approval of
Rathbones shareholders) and a Class 2 disposal for Investec Group.
The Combination is not subject to The City Code on Takeovers and
Mergers (the "Takeover Code").
Governance and Management
The Enlarged Rathbones Group will continue to be chaired by
Clive Bannister with the executive leadership team, under Rathbones
CEO Paul Stockton, bringing together an experienced leadership team
from both businesses, including Investec W&I UK CEO Iain Hooley
(subject to regulatory approval). A joint integration steering
committee (the " Joint Integration Steering Committee ") will also
be formed, comprising senior executives from both Rathbones and
Investec Group, to oversee and support the business
integration.
Under the terms of the Combination, two Investec Group
representatives will join the Board of the Enlarged Rathbones Group
as non-executive directors upon completion, reflecting Investec
Group's position as a significant, strategic shareholder. Investec
Group will be entitled to nominate two non-executive directors for
as long as it holds at least 20% of the issued share capital of the
Enlarged Rathbones Group; and one non-executive director for as
long as it holds at least 10% but less than 20% of the issued share
capital of the Enlarged Rathbones Group. Investec Group intends the
two non-executive directors to be Ciaran Whelan, Executive Director
of Investec plc, plus one other, who Investec Group anticipates
will be a current Investec plc non-executive director. Both
appointments will be subject to the approval of Rathbones'
Nomination Committee and the necessary regulatory approvals.
The Enlarged Rathbones Group will remain in compliance with the
UK Corporate Governance Code following completion.
Lock-up and Standstill
Subject to certain customary and other exceptions, Investec
Group will be subject to a lock-up for the first two years
following completion during which Investec Group will not be
permitted to sell any Consideration Shares. In each of years three
and four following completion, Investec Group will be entitled to
sell one-third of the Consideration Shares which it owns. Any
disposals of shares by Investec Group once released from lock-up
will be subject to customary orderly market provisions. The lock-up
arrangement will terminate on the fourth anniversary of
completion.
A standstill restriction will also apply to Investec Group under
which it will agree, among other matters, not to acquire shares in,
or make an unsolicited takeover offer for, Rathbones for the period
from signing to completion and up to the fifth anniversary of
completion.
Steps to completion
The Combination is conditional, among other things, on:
-- approval of the Combination by Rathbones' shareholders (by
ordinary resolution) at a general meeting ("General Meeting") of
Rathbones;
-- the Financial Conduct Authority ("FCA") and London Stock
Exchange agreeing to admit the ordinary share element of the
Consideration Shares to the premium listing segment of the Official
List and to trading on the London Stock Exchange's Main Market for
listed securities;
-- no material adverse change having occurred in respect of
either Rathbones or Investec W&I UK;
-- the Competition and Markets Authority ("CMA") confirming in
response to a briefing note that it has no further questions or,
alternatively, CMA approval; and
-- relevant financial and other regulatory approvals and
notifications being obtained, including in the UK, Jersey, Guernsey
and South Africa.
The approval of Rathbones' shareholders will be sought at the
General Meeting which will be convened in Q2 2023. Completion is
expected to occur in early Q4 2023 (subject to regulatory
approvals).
Commenting on the Combination, Clive Bannister, Chair of
Rathbones, said:
"Bringing Rathbones together with Investec W&I UK will
create the UK's leading discretionary wealth manager with
approximately GBP100 billion of funds under management and
administration. This transaction not only presents a compelling
strategic and financial rationale, but also accelerates Rathbones'
growth strategy. Operating at scale allows the group to offer an
even more attractive proposition to clients and colleagues,
supporting future growth and creating significant value for
Rathbones' shareholders. I look forward to Investec W&I UK
colleagues joining the Enlarged Rathbones Group, and welcome
Investec Group as a strategic shareholder. I am hugely excited
about what the Combination can deliver."
Commenting on the Combination, Fani Titi , Investec Group Chief
Executive Officer, said:
"The Combination of Investec W&I UK and Rathbones brings
together two businesses which have a long-standing heritage in UK
wealth management and closely aligned cultures. The strategic fit
of the two businesses is compelling with complementary strengths
and capabilities to enhance the overall proposition for clients.
This will be supported by the strategic partnership which offers
attractive growth and collaboration opportunities for both groups .
The transaction represents a real step-change and long-term
opportunity for our UK wealth strategy, underscores our commitment
to the UK wealth management market and enhances our UK business as
a whole."
Analyst presentation and conference call details
Rathbones will host a webcast for analysts and investors at
9.15am today. To join the webcast, please use the following
details:
https://www.investis-live.com/rathbone-brothers/64259b8a63f9f813004592ea/rabo
Operator Assisted Dial-In:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Access Code: 953597
The person responsible for arranging the release of this
announcement on behalf of Rathbones is Ali Johnson, Company
Secretary.
Enquiries
Rathbones Group Plc
Tel: +44 20 7399 0000
Paul Stockton, Group Chief Executive Officer
Jennifer Mathias , Group Chief Financial Officer
Sarah Lewandowski, Investor Relations
BofA Securities (Financial Adviser and Joint Corporate Broker to
Rathbones)
Tel: +44 20 7628 1000
Peter Luck, Fraser Allan, Joshua Maguire , Oliver Elias, Alex
Penney
Peel Hunt (Joint Corporate Broker to Rathbones)
Tel: +44 20 7418 8900
Andrew Buchanan, John Welch, Oliver Jackson, Sam Milford
Camarco (PR Adviser to Rathbones)
Tel: +44 20 3757 4984
Ed Gascoigne-Pees, Julia Tilley
Investec Group
Tel: +27 (0) 11 291 0129
Qaqambile Dwayi, Investor Relations
Investec Bank Limited (JSE Equity Sponsor to Investec Group)
Tel: +27 11 286 7000
Monique Otto
Fenchurch Advisory Partners (Joint Financial Adviser to Investec
Group)
Tel: +44 20 7382 2222
Malik Karim, Graham Marchant, Tom Murphy, Josh Needham
Investec Investment Banking (Joint Financial Adviser and Joint
Corporate Broker to Investec Group)
Tel: +44 20 7597 5970
Christopher Baird, Tom Lewin, Sean Crookes
Brunswick (South Africa PR advisers to Investec Group)
Tel: +27 (0) 63 685 6053
Graeme Coetzee
Lansons (UK PR advisers to Investec Group)
Tel: +44 (0) 78 6010 1715
Tom Baldock
Addleshaw Goddard LLP is providing legal advice to Rathbones.
Macfarlanes LLP is providing legal advice to Investec Group.
Combination of Rathbones and Investec Wealth & Investment
UK
to create the UK's leading discretionary wealth manager
1. Introduction
The Boards and Management of Rathbones and Investec Group are
pleased to announce that they have entered into a definitive
agreement regarding an all-share combination of Rathbones with
Investec W&I UK to create the UK's leading discretionary wealth
manager that will operate under the Rathbones brand.
The Combination brings together two trusted and prestigious UK
wealth management businesses with closely aligned cultures and
operating models and a shared commitment to client-centric values
and sustainable growth. The Combination represents a significant
value creation opportunity for both Rathbones and Investec Group
shareholders.
Under the terms of the Combination, the Enlarged Rathbones Group
will remain an independent premium-listed company operating under
the Rathbones brand with Investec Group as a supportive strategic
shareholder. Following completion, Investec Group will have an
economic interest in Rathbones' enlarged share capital of 41.25%
with Investec Group's voting rights limited to 29.9% of Rathbones'
enlarged total voting rights. Existing Rathbones shareholders will
have an economic interest of 58.75% and voting rights of 70.1%. The
terms of the Combination imply an equity value of GBP839 million
for Investec W&I UK.
2. Background to and Reasons for the Combination
2.1 Rathbones' Strategy
In October 2019, Rathbones launched its medium-term growth
strategy for the business in line with the Company's purpose of
thinking, acting and investing responsibly, centred around four
pillars of:
-- Enriching the client and adviser proposition and experience;
-- Supporting and delivering growth;
-- Inspiring our people; and
-- Operating more efficiently.
Rathbones has made significant steps forward in each of these
pillars over recent years. With the benefits of scale increasingly
key contributors in each of these areas, inorganic growth has
played an ever more important role across the UK wealth sector.
Rathbones has a track record of successful acquisitions , including
most recently the acquisition of Saunderson House in 2021 , and t
oday's announcement represents the next step in Rathbones' growth
strategy.
The Combination with Investec W&I UK further accelerates and
complements this strategy whilst also establishing a strategic
collaboration opportunity with Investec Group.
The need for cultural alignment remains an important principle
of Rathbones' acquisition strategy , and Investec W&I UK is a
strong fit with Rathbones' client-centric culture.
2.2 Reasons for the Combination
The Boards of Rathbones and Investec Group believe that the
Combination will unlock significant scale benefits through the
creation of the UK's leading discretionary wealth manager and with
approximately GBP100 billion of FUMA.
In particular, the Boards of Rathbones and Investec Group
believe that the Combination will:
-- enhance and enrich the client proposition across investment
management, financial planning, fund management and banking
services;
-- create a leading multi-channel distribution capability across
private clients, intermediaries and charities, through an expanded
network in 23 locations across the UK and Channel Islands;
-- attract and retain the best industry talent through a leading employee proposition;
-- leverage Rathbones' investment in technology and operating
model to deliver an optimal client experience whilst improving
operating efficiency across the larger combined business;
-- deliver significant value creation through the strong fit
between the two operating models, with target annual run-rate cash
synergies of at least GBP60 million, driven primarily by cost
savings as well as higher net interest income;
-- generate attractive financial returns for Rathbones : (i)
expected to be accretive to underlying EPS in the first full year
following completion; (ii) targeting low-teens underlying EPS
accretion in the third full year following completion; and (iii)
targeting double-digit post-tax return on invested capital in the
third full year following completion;
-- support the Enlarged Rathbones Group in maintaining a
resilient capital position through all share consideration with
earnings accretion underpinning its progressive dividend policy;
and
-- establish a long-term strategic partnership between Rathbones
and Investec Group to leverage attractive collaboration
opportunities.
2.3 Further Details on the Financial Impact of the
Combination
The Combination will bring an additional GBP39.7 billion of FUMA
to the Rathbones Group and 325 investment managers and 45 financial
planners as well as approximately 40,000 client relationships.
Investec W&I UK has 15 offices, many of which are in
complementary locations and will enable the Enlarged Rathbones
Group to operate in 23 locations across the UK and Channel
Islands.
Rathbones expects that the integration of Investec W&I UK
will unlock significant value for shareholders over time. The
Combination is targeting to deliver total annualised run-rate
synergies of at least GBP60 million on a pre-tax cash basis(1) , of
which approximately:
-- GBP18 million is expected to be generated from the
consolidation of technology platforms and operations, leveraging
Rathbones' well-invested technology platform and benefiting from
collaboration with Investec Group to support further operational
efficiencies;
-- GBP32 million is expected to be generated from the
consolidation of enablement functions, third party services,
property and other Combination benefits; and
-- GBP10 million (2) of additional net interest income as a
result of migrating Investec W&I UK's client and firm cash on
to Rathbones' platform and banking licence, allowing for greater
investment flexibility to generate higher returns .
Rathbones expects to realise approximately 25% of the estimated
run-rate synergies by the end of the first full year following
completion, to realise approximately 70% by the end of the second
full year and to realise more than 90% of the remaining run-rate
synergies in the third full year post-completion once the migration
of Investec W&I UK's clients to Rathbones' platform is
complete.
As of the date of this announcement, Rathbones expects to incur
net cash costs to achieve (3) the expected synergies of
approximately GBP98 million on a pre-tax basis with more than 90%
to be incurred broadly evenly in the first and second full years
post-completion with the balance in the third full year
post-completion. Of the GBP98 million, approximately GBP78 million
is expected to be incurred as non-underlying expenses and
approximately GBP20 million related to property leases will be
depreciated in accordance with IFRS 16 over a period of
approximately 9 years through underlying earnings.
The Rathbones directors believe that the estimated synergies set
out above could not be achieved without the Combination and reflect
both the beneficial elements and relevant costs. The synergies
targeted from the Combination are in addition to those from the
integration of Saunderson House and Speirs & Jeffrey.
The costs to achieve set out above exclude approximately GBP34
million of pre-tax net costs (4) expected to be incurred in
relation to incentivisation of key employees of the Enlarged
Rathbones Group to deliver the benefits of the Combination, to be
incurred over approximately five years post-completion (with the
majority in the first three years post-completion) and primarily in
the form of Rathbones shares.
It is intended that the Enlarged Rathbones Group's London office
will operate from the same building as Investec Group at 30 Gresham
Street, which will further support the strategic partnership
between the two organisations.
(_____________________________________)
(1) On a cash basis, before IFRS acquisition and lease
accounting impact and depreciation.
(2) Based on current cash balances within Investec W&I UK
accounts and current interest rate and assuming a Bank of England
base rate of 4.0%. For illustrative purposes, if the Bank of
England base rate were 3.0%, it is expected that the net interest
income synergy would reduce by approximately GBP2 million.
(3) Separate to the cost to achieve, the Enlarged Rathbones
Group will incur capital expenditure estimated at GBP25 million in
relation to the fit-out of additional space in the London office.
This will be funded by a combination of anticipated lease
incentives from the landlord and additional cash contribution from
the Investec Group, that will be retained by Investec W&I UK at
completion.
(4) The cost of GBP34 million is stated net of a cash
contribution from Investec Group equivalent to GBP31 million on a
pre-tax basis.
Principal Terms of the Combination
Share Purchase Agreement and consideration structure
Rathbones and Investec Group have entered into a share purchase
agreement (the "Share Purchase Agreement"). Under the terms of the
Share Purchase Agreement, at completion Rathbones will acquire the
entire issued share capital of Investec W&I UK from Investec
Group, and in exchange, Investec Group will receive at completion
(i) Rathbones ordinary voting shares representing 29.9% of
Rathbones' enlarged ordinary voting share capital ("Ordinary
Shares"); and (ii) Rathbones non-voting ordinary shares
("Convertible Non-Voting Ordinary Shares"), such that Investec
Group will have an economic interest in the Enlarged Rathbones
Group of 41.25%.
The Convertible Non-Voting Ordinary Shares will rank pari passu
with the Ordinary Shares save that they will not carry voting
rights. At any time after completion, Investec Group may convert
the Convertible Non-Voting Ordinary Shares into Ordinary Shares on
a 1-for-1 basis provided that at no time shall Investec Group hold
more than 29.9% of Rathbones' enlarged voting rights. The
Convertible Non-Voting Ordinary Shares are non-transferable. Both
the Ordinary Shares and Convertible Non-Voting Ordinary Shares are
expected to qualify as common equity tier 1 capital.
The Share Purchase Agreement contains warranties, covenants and
undertakings given by, and termination rights in favour of, each of
Rathbones and Investec Group that are customary for a transaction
of this nature.
Completion is subject to, among other matters:
-- approval of the Combination by Rathbones' shareholders (by
ordinary resolution) at a General Meeting of Rathbones;
-- the FCA and London Stock Exchange agreeing to admit the
Ordinary Share element of the Consideration Shares to the premium
listing segment of the Official List and to trading on the London
Stock Exchange's Main Market for listed securities;
-- no material adverse change having occurred in respect of
either Rathbones or Investec W&I UK;
-- the CMA confirming in response to a briefing note that it has
no further questions or, alternatively, CMA approval; and
-- relevant financial and other regulatory approvals and
notifications being obtained, including in the UK, Jersey, Guernsey
and South Africa.
Completion is not conditional on investor or shareholder
approvals in respect of Investec Group.
The Share Purchase Agreement contains other customary protective
termination rights and conduct obligations and will be capable of
termination by either Rathbones or Investec Group if completion has
not occurred on or before 3 April 2024 or such later date as
Rathbones and Investec Group may agree.
The General Meeting is expected to be convened during Q2 2023.
If the Rathbones Board changes its recommendation that Rathbones
shareholders vote in favour of the Combination, then either
Rathbones or Investec Group will be entitled to terminate the Share
Purchase Agreement, and Rathbones will be required to pay a
termination fee of GBP9.5 million plus applicable VAT to Investec
Group. This fee is also payable if a competing proposal becomes
effective which has been recommended by the Board of Rathbones.
Completion is expected to occur in early Q4 2023 (subject to
regulatory approvals).
Relationship Agreement
At completion, Rathbones and Investec Group will enter into a
relationship agreement governing the relationship between them (the
" Relationship Agreement " ).
The Relationship Agreement will set out Investec Group's rights
to appoint non-executive directors as set out in the section headed
"Governance and Management" below. Rathbones and Investec Group
will establish a joint integration steering committee (the "Joint
Integration Steering Committee"), comprising senior executives from
both Rathbones and Investec Group to oversee and support the
business integration between (i) signing and closing; and (ii) for
not less than three years following closing.
Subject to certain customary and other exceptions Investec Group
will be subject to a lock-up for the first two years following
completion during which it will not be permitted to sell any
Consideration Shares. In each of years three and four following
completion, Investec Group will become entitled to sell one third
of the Consideration Shares which it owns. Investec Group may not
sell more than one third of the Consideration Shares in any rolling
12-month period and may not roll forward any unused allowance from
years two to three into years three to four. Any disposals of
Consideration Shares by Investec Group once released from lock-up
will be subject to customary orderly marketing provisions. The
lock-up arrangement will terminate on the fourth anniversary of
completion.
A standstill restriction will also apply to Investec Group under
which it will agree not, among other matters, to acquire further
shares in, or make an unsolicited takeover offer, for Rathbones for
the period from signing to completion and up to the fifth
anniversary of completion.
Rathbones and Investec Group have also entered into arrangements
in relation to the separation and transition of Investec W&I UK
from the Investec Group to Rathbones. The parties have also entered
into non-binding memoranda of understanding in relation to future
co-operation between Rathbones and Investec Group. Rathbones and
Investec Group intend to progress these matters further over the
coming months and further details will be provided in the
Circular.
Takeover Code
A Rule 9 Waiver will not be sought for the conversion of
Convertible Non-Voting Ordinary Shares into Ordinary Shares,
reflecting that the Convertible Non-Voting Ordinary Shares would
not be able to be converted into Ordinary Shares if such conversion
would result in Investec Group owning more than 29.9% of Rathbones'
enlarged ordinary voting share capital. Accordingly, the
Combination is not subject to the Takeover Code and consequently
the provisions of the Takeover Code applicable to a Rule 9 Waiver
will not apply.
3. Dividend Policy
Rathbones operates a generally progressive dividend policy which
aims to increase the dividend in line with the growth of the
business over each economic cycle. The Rathbones Board expects the
Combination to generate attractive financial returns, which,
combined with the Enlarged Rathbones Group's strong capital base,
significant anticipated future capital generation and encouraging
outlook, reinforces Rathbones' commitment to its progressive
dividend policy.
4. Governance and Management
The Enlarged Rathbones Group will retain its premium listing on
the Official List and continue to be traded on the London Stock
Exchange's Main Market for listed securities as Rathbones Group
Plc. The Enlarged Rathbones Group will continue to be chaired by
Clive Bannister and led by Rathbones' CEO Paul Stockton, with the
broader management team bringing together the best leaders from
both businesses, including Iain Hooley, CEO (subject to regulatory
approval) of Investec W&I UK, supported by Rathbones and
Investec W&I UK colleagues.
Investec Group will be entitled to nominate, subject to
satisfaction of certain customary suitability criteria, for
appointment to the Board of the Enlarged Rathbones Group:
(i) two non-executive directors for as long as it holds at least
20% of the issued share capital of the Enlarged Rathbones Group;
and
(ii) one non-executive director for as long as it holds at least
10% but less than 20% of the issued share capital of the Enlarged
Rathbones Group.
Investec Group intends the two non-executive directors to be
Ciaran Whelan, Executive Director of Investec plc, plus one other,
who Investec Group anticipates will be a current Investec plc
non-executive director. Both appointments will be subject to the
approval of Rathbones' Nomination Committee and the necessary
regulatory approvals.
The Enlarged Rathbones Group will remain in compliance with the
UK Corporate Governance Code following completion.
5. Integration Planning
Rathbones' management team has a proven track record of
integrating acquisitions, including most recently the Saunderson
House acquisition in 2021 where the integration continues to
progress well. As referenced above, a Joint Integration Steering
Committee has been established to oversee the integration with
common delivery cultures and aligned outcomes that draw on the
"best of both" approach that has been adopted to define the
combined operating model. The integration will see close
collaboration with Investec Group with the complementary technology
infrastructure and operating models of the two businesses being
well suited for the Combination.
The integration will be phased into preparation; parallel run;
integration; and optimisation stages to ensure an efficient process
that manages the interests and integration objectives of all
stakeholders. This governance structure has been put in place to
ensure that cadence of delivery is maintained.
6. Next Steps and Timetable
The Combination will require the approval of Rathbones'
shareholders. A combined prospectus and Class 1 circular (the
"Circular") containing further details of the Combination,
appropriate details on Rathbones, Investec W&I UK, Investec
Group, the rights attaching to the Consideration Shares, the
Rathbones Board's recommendation in respect of the Combination, the
notice of General Meeting and the resolutions required to approve
the Combination is expected to be sent to Rathbones' shareholders
in Q2 2023.
7. Information on Rathbones Group Plc
Rathbones provides individual investment and wealth management
services for private clients, charities, trustees and professional
partners. Rathbones has been in business since 1742 and has been
trusted for generations to manage and preserve clients' wealth.
Rathbones is a FTSE 250 company operating from 15 offices
throughout the UK and Jersey and had FUMA of GBP60.2 billion as at
31 December 2022.
8. Information on Investec Group
Investec Group (comprising Investec PLC and Investec Limited)
partners with private, institutional, and corporate clients,
offering international banking, investments, and wealth management
services in two principal markets, South Africa and the UK, as well
as certain other countries. The group was established in 1974 and
currently has approximately 8,500 employees. In 2002, Investec
Group implemented a dual listed company structure with listings on
the London and Johannesburg Stock Exchanges.
9. Information on Investec W&I UK
Investec W&I UK is one of the UK's leading private client
wealth managers, with responsibility for GBP39.7 billion of FUMA as
at 30 September 2022, offering holistic wealth management services
covering bespoke discretionary investment management together with
financial planning and advice to private clients, trusts, charities
and pension funds. The business operates from 15 offices across the
UK and Channel Islands, reflecting Investec W&I UK's truly
regional heritage (5) . As of 30 September 2022, approximately 74%
of FUMA relate to private client assets (6) with the balance being
charities and clients introduced by intermediaries.
Investec W&I UK has historically benefited from cross
referrals from Investec Bank plc which as at 30 September 2022 had
over 6,000 private banking clients and contributed approximately
GBP280 million of funds under management ("FUM") referrals to
Investec W&I UK in the 6 months to 30 September 2022.
(_____________________________________)
(5) Excludes consolidation adjustments relating to referred
client assets from Investec W&I South Africa (client assets
presented on a 100% basis).
(6) Based on Investec W&I UK definition of private
clients.
For the year ended 31 March 2022, Investec W&I UK reported
profit before tax of GBP84.6 million and reported gross assets of
GBP589.9 million. Further financial information in relation to the
Investec W&I UK business is set out in Appendix I to this
announcement
This announcement should be read in its entirety. In particular,
you should read and understand the information provided in the
'Important Notices' section below.
Appendix I - Additional Financial Information
Investec W&I UK summary unaudited financial information
The following financial information on Investec W&I UK
reflects the perimeter of the Combination and has been extracted
from unaudited management financial information prepared by
Investec W&I UK and adjusted for Rathbones' principal
accounting policies. Investec W&I UK has not in the past
constituted a separate group and has not previously prepared or
reported on any combined of consolidated financial information.
This financial information is provided for background information
only, has not been independently verified by Rathbones and may be
different to the financial information on Investec W&I UK that
will be reported in the Circular when published.
In accordance with the Listing Rules, the Circular when
published will include full audited historical three-year financial
information on Investec W&I UK under IFRS, in a form consistent
with the accounting policies adopted by Rathbones in its own annual
consolidated accounts. It is possible that the financial
information in this Appendix may differ from the financial
information included in the Circular.
Investec W&I 12 months 12 months 12 months 6 months to
UK to 31-Mar to 31-Mar to 31-Mar 30-Sep 2022
2020 2021 2022
Closing FUMA GBP32.8bn GBP41.3bn GBP43.7bn GBP39.7bn
(1)
----------- ----------- ----------- -------------
Net organic GBP0.5bn GBP1.1bn GBP1.2bn GBP0.4bn
flows
----------- ----------- ----------- -------------
Organic growth
rate(2) 1.3% 3.4% 2.9% 2.0%(3)
----------- ----------- ----------- -------------
Operating GBP301.8m GBP311.2m GBP337.8m GBP169.1m
Income
----------- ----------- ----------- -------------
Underlying GBP67.3m GBP77.0m GBP89.2m GBP39.3m
PBT
----------- ----------- ----------- -------------
Underlying
PBT Margin 22.3% 24.8% 26.4% 23.2%
----------- ----------- ----------- -------------
Notes: (1) Closing FUMA as at 31 March 2020, 31 March 2021, 31
March 2022 and 30 September 2022. (2) Net organic growth calculated
as net flows / opening FUMA. (3) Based on an annualised rate. FUMA
and underlying measures are unaudited.
As set out in the Transitional Services Agreement, on transfer
to Rathbones, the amount charged to Investec W&I UK by Investec
Group for the provision of central services will reduce by
approximately GBP7 million per annum based on an annualised figure
for the 6 months to 30 September 2022.
Illustrative financial information on the Combination
The financial information below in relation to Rathbones has
been extracted from Rathbones' audited IFRS consolidated accounts
for the year ended 31 December 2022. As above, the financial
information below in relation to Investec W&I UK has been
extracted from unaudited management financial information and
adjusted for Rathbones' principal accounting policies.
Investec W&I UK Investec W&I UK Rathbones
12 months to 31-Mar 6 months to 30-Sep 12 months to 31-Dec
2022 (unaudited) 2022 (unaudited) 2022 (audited)
Closing FUMA GBP43.7bn GBP39.7bn GBP60.2bn
(1)
--------------------- -------------------- ---------------------
Operating Income GBP337.8m GBP169.1m GBP455.9m
--------------------- -------------------- ---------------------
Underlying GBP89.2m GBP39.3m GBP97.1m( (2)
PBT
--------------------- -------------------- ---------------------
Underlying
PBT Margin 26.4% 23.2% 21.3%
--------------------- -------------------- ---------------------
Notes: (1) Closing FUMA as at 31 March 2022 and 30 September
2022. (2) Rathbones' underlying PBT includes digital programme
spend of GBP16.3 million. FUMA and underlying measures are
unaudited.
Rathbones uses certain measures to assess the financial
performance of its business. Certain of the measures included in
this Appendix I are 'non-IFRS' measures and are calculated using
financial measures that are not calculated in accordance with IFRS.
These 'non-IFRS' measures include underlying measures of income,
expenditure and earnings when assessing the performance of the
Company. Rathbones believes that these are considered to provide
useful additional information on business performance, rather than
reviewing results on a statutory basis only. These measures are
also widely used by research analysts covering the Company. These
non-IFRS measures are not measures based on IFRS and should not be
considered as an alternative to the audited historical financial
information that will be included in the Circular or other
indicators based on IFRS measures. Other companies may calculate
these measures in a different way, and Rathbones' presentation may
not be comparable to similarly entitled measures of other
companies.
Appendix II - Sources and Bases
1. The latest practicable date before the date of this
announcement is 3 April 2023 ("Latest Practicable Date").
2. Rathbones had 63,433,381 ordinary shares in issue as at the Latest Practicable Date.
3. Investec W&I UK's equity value calculated using
44,538,331 new Rathbones shares to be issued to Investec Group
(comprising 27,056,463 Ordinary Shares and 17,481,868 Convertible
Non-Voting Ordinary Shares) multiplied by the closing price of
Rathbones' ordinary shares per the Daily Official List of GBP18.84
on the Latest Practicable Date.
4. The Combined FUMA of approximately GBP100 billion has been
calculated from Rathbones FUMA per its full year results
announcement for the year ended 31 December 2022 of GBP60.2 billion
and Investec W&I UK's FUMA of approximately GBP39.7 billion for
six months ended 30 September 2022.
5. Net interest income assumes a Bank of England base rate of
4.0%. For illustrative purposes, if the Bank of England base rate
were 3.0%, it is expected that the net interest income synergy
would reduce by approximately GBP2 million.
6. The synergies and cost savings set out in this announcement
have been informed by Rathbones management's commercial experience
and their experience of acquiring and integrating other businesses.
Such statements are not intended to be a profit forecast and should
not be interpreted as such. Such statements relate to future
actions and circumstances which, by their nature, involve risks,
uncertainties and contingencies. As a result, the synergies
referred to may not be achieved, may be achieved later or sooner
than estimated or could be materially different from those
estimated.
The statements have been prepared on the basis of various
assumptions and expectations including, without limitation: (i) the
scope, nature and timing of the process to integrate Investec
W&I UK and its operations into the Enlarged Rathbones Group and
that there are no material differences or delays to the process and
timing contemplated; (ii) assumptions on future interest rates and
foreign exchange rates and the potential movements in such rates;
(iii) that there will be no material change in macroeconomic, legal
or regulatory conditions that materially impact on the
implementation or costs to achieve the proposed cost savings; (iv)
that there will be no significant change in the underlying
operations or assets of the businesses of Rathbones or Investec
W&I UK as a result of the Combination; and (v) the timing,
extent and costs of investment to achieve the expected
synergies.
The baselines used for the quantified cost synergies were
annualised Investec Group management accounts for the six-month
period from 1 April 2022 to 30 September 2022, and included
adjustments for: (i) standalone operating expenses and group
recharges; (ii) allocations for services to other Investec Group
entities; and (iii) select Rathbones operating expense items.
Baseline costs for each synergy and cost saving have been
calculated exclusive of depreciation and amortisation.
7. Rathbones' annual report for the year ended 31 December 2022 is available at https://www.rathbones.com/investor relations/results and presentations
8. Investec W&I UK historical financials do not include pro
forma adjustments in respect of its acquisition of Murray Asset
Management which completed in February 2023 (Murray Asset
Management held approximately GBP400 million FUMA as at 31 December
2022). The financial information on Investec W&I UK reflects
the perimeter of the transaction and has been extracted from
unaudited management financial information prepared by Investec
W&I UK, adjusted for Rathbones' principal accounting policies,
and has not been independently verified by Rathbones.
9. Investec Bank UK statistics on high net worth client base,
characteristics and historical bank to wealth FUM referrals based
on Investec Group 2022 Interim Results Booklet, Investec Group 2021
Business Update Presentation and Investec Group 2022 Annual Results
Booklet.
IMPORTANT NOTICES
The information contained in this announcement is inside
information as stipulated under the UK Market Abuse Regulation.
Upon publication of this announcement, this inside information is
now considered to be in the public domain.
Neither this announcement nor any copy of it may be taken or
transmitted directly or indirectly into or from any jurisdiction
where to do so would constitute a violation of the relevant laws or
regulations of such jurisdiction. Any failure to comply with this
restriction may constitute a violation of such laws or regulations.
Persons into whose possession this announcement or other
information referred to herein comes should inform themselves
about, and observe, any restrictions in such laws or
regulations.
This announcement has been prepared for the purpose of complying
with the applicable law and regulation of the United Kingdom and
information disclosed may not be the same as that which would have
been disclosed if this announcement had been prepared in accordance
with the laws and regulations of jurisdictions outside the United
Kingdom.
This announcement does not constitute or form part of any offer,
invitation to sell, otherwise dispose of or issue, or any
solicitation of any offer to purchase or subscribe for, any shares
or other securities nor shall it or any part of it, nor the fact of
its distribution, form the basis of, or be relied on in connection
with, any contract commitment or investment decision.
This announcement does not constitute an offer of securities for
sale in the United States or an offer to acquire or exchange
securities in the United States. No offer to acquire securities or
to exchange securities for other securities has been made, or will
be made, directly or indirectly, in or into, or by use of the
mails, any means or instrumentality of interstate or foreign
commerce or any facilities of a national securities exchange of,
the United States or any other country in which such offer may not
be made other than: (i) in accordance with applicable United States
securities laws or the securities laws of such other country, as
the case may be; or (ii) pursuant to an available exemption from
such requirements. The securities referred to herein have not been
and will not be registered under the U.S. Securities Act of 1933,
as amended, or under the securities laws of any state or other
jurisdiction of the United States.
This announcement may include statements that are, or may be
deemed to be, forward-looking statements. These forward-looking
statements may be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"envisages", "plans", "projects", "anticipates", "targets", "aims",
"expects", "intends", "may", "will" or "should" or, in each case,
their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters
that are not historical facts and involve predictions.
Forward-looking statements may and often do differ materially from
actual results. Any forward-looking statements reflect Rathbones'
current views with respect to future events and are subject to
risks relating to future events and other risks, uncertainties and
assumptions relating to Rathbones' or Investec W&I UK's results
of operations, financial position, liquidity, prospects, growth or
strategies and the industries in
which they operate. Forward-looking statements speak only as of
the date on which they are made and cannot be relied upon as a
guide to future performance. Save as required by law or regulation,
Rathbones disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements
in this announcement that may occur due to any change in its
expectations or to reflect events or circumstances after the date
of this announcement. Nothing in this announcement should be
construed as a profit estimate or profit forecast and no statement
in this announcement should be interpreted to mean that earnings
per share of Rathbones for the current or future financial years
would necessarily match or exceed the historical published earnings
per share of Rathbones.
Completion of the Combination is subject to the satisfaction of
a number of conditions as more fully described in this
announcement. Consequently, there can be no certainty that
completion of the Combination will be forthcoming.
This announcement is not a prospectus and has been prepared
solely for the Combination referred to in this announcement. The
Circular will be published by Rathbones in connection with the
Combination in due course.
Certain figures contained in this announcement, including
financial information, have been subject to rounding adjustments.
Accordingly, in certain instances, the sum or percentage change of
the numbers contained in this announcement may not conform exactly
with the total figure given.
Merrill Lynch International ("BofA Securities"), which is
authorised by the Prudential Regulation Authority and regulated by
the Financial Conduct Authority and the Prudential Regulation
Authority in the UK, is acting exclusively for Rathbones in
connection with the Combination and for no one else and will not be
responsible to anyone other than Rathbones for providing the
protections afforded to its clients or for providing advice in
relation to the Combination. Neither BofA Securities, nor any of
its affiliates, owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of BofA Securities in connection with this
announcement, any statement contained herein or otherwise. No
representation or warranty, express or implied, is made by BofA
Securities as to the contents of this announcement, including its
accuracy, fairness, sufficiency, completeness or verification.
Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Rathbones and for no one else in connection with
the matters referred to in this announcement. Peel Hunt will not be
responsible to anyone other than Rathbones for providing the
protections afforded to clients of Peel Hunt nor for providing
advice in relation to the contents of, or matters referred to in,
this announcement. Neither Peel Hunt nor any of its affiliates owes
or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of Peel
Hunt in connection with the matters referred to in this
announcement, or otherwise.
Fenchurch Advisory Partners LLP ("Fenchurch"), which is
authorised and regulated by the Financial Conduct Authority, is
acting exclusively for Investec Group and no one else in connection
with the matters referred to in this announcement. Fenchurch will
not be responsible to anyone other than Investec Group for
providing the protections afforded to clients of Fenchurch, nor for
providing advice in relation to the contents of, or matters
referred to in, this announcement. Neither Fenchurch nor any of its
affiliates owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person who is not a client
of Fenchurch in connection with the matters referred to in this
announcement, or otherwise.
Investec Bank plc ("Investec Investment Banking"), which is
authorised by the Prudential Regulation Authority (the "PRA") and
regulated by the Financial Conduct Authority and PRA in the United
Kingdom, is acting exclusively as financial adviser to Investec
Group and for no one else in connection with the matters referred
to in this announcement and will not be responsible to any person
other than Investec Group for providing the protections afforded to
clients of Investec Investment Banking, nor for providing advice in
relation to the content of this announcement or any matter referred
to in this announcement. Neither Investec Investment Banking nor
any of its subsidiaries, branches or affiliates owes or accepts any
duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise)
to any person who is not a client of Investec in connection with
this announcement, any statement contained herein or otherwise.
This information is provided by RNS, the news service of the
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END
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