Rathbone Brothers Plc Acquisitions and share placing to finance future growth
1 April 2014 THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL
Acquisitions of Jupiter Asset Management Limited’s private client and charity investment management business and part of the London private client wealth management business of Tilney Investment Management Limited and share placing
- Acquisition of Jupiter Asset Management Limited’s private client and charity investment management business for £43.1 million (assuming full value of funds under management transferred)
- Acquisition of part of the London private client wealth management business of Tilney Investment Management Limited for £14.3 million (assuming full value of funds under management transferred)
- Placing with existing institutional investors of 1,343,000 Placing Shares at 1,814p (being the closing share price on 31 March 2014) to raise £24.4 million
- The combined effect of the acquisitions (taking into account the share placing) is expected to be earnings neutral in 2014 and earnings-enhancing in 2015
- On a pro-forma basis, Rathbones' funds under management increase by approximately 12.7% to £24.8 billion
Acquisition of Jupiter Asset Management Limited’s private client and charity investment management business
Rathbone Brothers Plc ("Rathbones" or the "Company") announces that its wholly-owned principal subsidiary, Rathbone Investment Management Limited ("RIM"), has agreed to purchase Jupiter Asset Management Limited’s private client and charity investment management business ("Jupiter Private Clients"). As a result it expects to welcome a team of 28 professionals to Rathbones. The team is led by Andrew Clark, Head of Jupiter Private Clients, and includes 12 experienced investment managers.
Jupiter Private Clients’ funds under management subject to the transaction were £2.1 billion at 14 March 2014. The level of consideration payable by RIM to Jupiter Asset Management Limited will be calculated based on the quantum and mix of funds under management transferred at completion, with reference to their value as at 14 March 2014, and taking into account any additions or withdrawals (but not market movements) over the period between this date and completion.
Should the full value of Jupiter Private Clients’ funds under management subject to the transaction transfer to RIM at completion, based on their value at 14 March 2014, the consideration would be £43.1 million in cash. The consideration is subject to a minimum level of £32.0 million and a maximum level of £53.9 million (should additional funds under management from new or existing clients of Jupiter Private Clients transfer to RIM). The consideration will be paid on completion, which is expected to occur towards the end of the third quarter of 2014, and will be financed from internal resources. No other assets will transfer to Rathbones as a result of the transaction.
Rathbones' funds under management were £22.0 billion at 31 December 2013. If all Jupiter Private Clients' funds under management, as at 14 March 2014, transfer to Rathbones, this will increase Rathbones' funds under management on a pro-forma basis by 9.5% to £24.1 billion.
In the year ended 31 December 2013, the funds attributable to Jupiter Private Clients generated pro-forma revenues of £12.1 million. Related pro-forma costs of £5.6 million were associated with the 28 professionals being taken on by Rathbones for the equivalent period. The pro-forma profit contribution in 2013 of the acquired business, assuming 100% transfer of funds under management to Rathbones at completion, would therefore have been £6.5m before overheads, administrative expenses and central costs. Rathbones' project and transaction costs in 2014 are expected to be approximately £1.8 million. The transaction is expected to be earnings-enhancing in 2015.
Rathbones was advised by Canaccord Genuity and Addleshaw Goddard LLP in relation to the acquisition.
Acquisition of part of the London private client wealth management business of Tilney Investment Management Limited
Rathbones also announces that RIM has agreed to purchase part of the London private client wealth management business of Tilney Investment Management Limited, which is part of Deutsche Asset & Wealth Management ("Tilney London Private Clients"). As a result, it welcomes a team of five investment professionals, led by Jeremy Newman, who will join Rathbones.
Tilney London Private Clients' funds under management were £0.7 billion at 21 February 2014. The cost to RIM, if 100% of the funds under management were to transfer, would be £14.3 million payable at various times between completion (expected by the end of June 2014) and January 2016.
The transaction is expected to result in a small accretion in earnings in 2014 and to be earnings-enhancing in 2015.
Rathbones also announces that it has raised approximately £24.4 million (before expenses) via a non-pre-emptive share placing, with existing institutional investors, of 1,343,000 new ordinary shares of 5 pence each in the capital of the Company ("Placing Shares").
The Placing Shares have been issued at a price of 1,814 pence per Placing Share ("Placing Price"), being the closing share price on 31 March 2014, and represent approximately 2.9 per cent of the Company’s issued share capital ("Placing").
Background to and reasons for the Placing
Assuming that all of the funds under management of Jupiter Private Clients and Tilney London Private Clients transfer to Rathbones, then (based upon values of acquired funds under management at 14 March 2014, for Jupiter Private Clients, and 21 February 2014, for Tilney London Private Clients) the total consideration payable under these transactions is expected to be £57.4 million.
The Jupiter and Tilney London transactions illustrate Rathbones’ ability to capitalise on earnings-enhancing acquisition opportunities to grow its business. As a result of these transactions the amount of surplus capital allocated by the Company for acquisitions is expected to be largely utilised. The Placing provides the Company with the flexibility to continue to respond to similar earnings-enhancing acquisition opportunities. Proceeds of the Placing are expected to be used to replenish capital which has been utilised in recent acquisitions (including those announced today) in order to take advantage of further acquisition opportunities and for general corporate purposes.
Terms of the Placing
Rathbones appointed Canaccord Genuity Limited and Peel Hunt LLP as Joint Bookrunners, joint brokers and agents to the Placing.
The Placing is not underwritten, and was carried out pursuant to the authorities granted by shareholders at the Company's annual general meeting on 14 May 2013, so does not require any further shareholder approval. Application has been made for the Placing Shares to be admitted to the premium segment of the Official List of the Financial Conduct Authority and to trading on the Main Market of the London Stock Exchange ("Admission"). Settlement for the Placing Shares together with Admission is expected to become effective on 4 April 2014.
Following Admission, the Company will have issued 47,657,339 ordinary shares of 5 pence each in the Company, of which 50,000 are held in treasury. On Admission, the Company therefore will have 47,607,339 shares in issue excluding shares held in treasury. This number represents the total voting rights in the Company and may be used by shareholders as the denominator for the calculations by which they can determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.
On Admission, the Placing Shares will rank pari passu in all respects with the existing ordinary shares in the capital of the Company.
Philip Howell, Chief Executive of Rathbone Brothers Plc, commented:
“The acquisitions of these businesses from Jupiter Asset Management and Tilney Investment Management are an excellent fit. They demonstrate the merits of Rathbones to both clients and investment management teams, as well as our ability to capitalise on earnings-enhancing acquisition opportunities to grow our business. We welcome the clients and investment teams of Jupiter and Tilney London and are sure that they will benefit from the stability and infrastructure that Rathbones provides.
"We expect to see more acquisition opportunities in the private client industry in the short to medium term. Raising capital now will give us flexibility to continue to take advantage of similar opportunities as they arise."
For further information contact: Rathbones Brothers Plc
Mark Nicholls, Chairman
Philip Howell, Chief Executive
Paul Stockton, Finance Director
Tel: 0207 399 0000