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Rathbone acquires Speirs & Jeffrey in £104m deal

Rathbone Brothers is acquiring Speirs & Jeffrey, Scotland’s largest independent wealth manager in a deal worth an initial £104 million.

The deal will make multi-million fortunes for Speirs & Jeffrey’s executive directors, all of whom will be joining Rathbones along with the investment managers.

Its CEO Russell Crichton (pictured) will become the head of Rathbones’ Scottish business. Rathbones’ Glasgow team will combine with Speirs & Jeffrey to consolidate Rathbones’ existing Glasgow presence.

In a statement this morning Rathbones said the two companies share a strong cultural alignment, particularly in relation to the investment process and proposition.

Speirs & Jeffrey has c.8,500 clients and nearly three quarters have been with the company for more than 10 years. It has funds under management of £6.7 billion and 38 investment professionals.

Rathbones is a consolidator within the wealth management industry and 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 £44.5bn. 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 £104m. 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 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% 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 £6m per annum within three years, principally from the streamlining of operations and infrastructure, with a total of  approximately £3m 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.

Summary

  • Acquisition of Speirs & Jeffrey, Scotland’s largest independent wealth manager with funds under management of £6.7bn
  • Increases Rathbones’ pro forma funds under management by 18% to £44.5bn
  • Initial consideration of £104m comprising £79m cash (funded from a combination of internal cash resources and the proceeds of a proposed £60m equity placing separately announced this morning) and the issue of 1.0m new Rathbones shares worth £25m
  • 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



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