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Schroders buys a chunk of River & Mercantile

The blue-blooded asset managers lays down £230m to acquire part of River & Mercantile
Schroders buys a chunk of River & Mercantile
  • Schroders makes a canny bolt on acquisition
  • The company remains the sector's premium share

Management at Schroders (SDR) took some time off from the grouse moors to put in a bid worth £230m for the Solutions part of River & Mercantile. On the face of it, the acquisition looks like a straightforward bolt-on addition to Schroder’s core business. The Solutions business comprises advisory, fiduciary management and derivatives and brings with it around £42bn of funds under management. As part of the deal, Solutions chief executive James Barham joins the company and will report directly to Schroders chief executive Peter Harrison.

Schroders seems to be buying a business with a known track record. According to the last set of accounts for River & Mercantile filed at Companies’ House, R&M’s derivatives division stood out particularly with sales of £5.8bn of structured equity products. R&M itself is primarily a pension fund manager with clients in the transport sector and across healthcare and research and development-based industries.

Any acquisition by Schroders is likely to be carefully considered and the asset management base of the Solutions business is an obvious fit. It will be interesting to see if it is immediately accretive as the current forward PE of over 17 times consensus forecasts is easily at a premium for the entire fund management sector. On the basis that Schroders has always consistently delivered, we maintain our longstanding Buy recommendation at 3,641p.

Last IC view: Buy, 3,687p, 29 Jul 2021