Rathbone Brothers Rathbone Brothers Plc : Acquisition

 
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: [phone] 
 
   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                    [phone] 
RBC Capital Markets (Financial Adviser and Joint Corporate 
 Broker to Rathbones) 
 Oliver Asplin Hearsey 
 Kevin Smith 
 Marcus Jackson 
 Paul Lim                                                    [phone] 
Peel Hunt (Joint Corporate Broker to Rathbones) 
 Adrian Haxby 
 Roger Lambert 
 Guy Wiehahn                                                 [phone] 
Camarco (Communications Adviser to Rathbones) 
 Ed Gascoigne-Pees 
 Hazel Stevenson                                             [phone] 
Spencer House Partners LLP (Financial Adviser to Speirs 
 & Jeffrey) 
 Andrew Malcolm 
 Alexander Fellowes                                          [phone] 
 
 
   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)

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