Brewin Dolphin (BRW) is the latest UK wealth manager to be targeted by a North American behemoth, with Royal Bank of Canada (CA:RY) offering a punchy £1.6bn or 515p per share for the firm in an all-cash deal - a 62 per cent premium to yesterday’s closing price.
The companies expect the deal to be completed in the third quarter of this year, subject to shareholder and regulatory approval. Brewin’s directors unanimously recommended that shareholders vote in favour of the takeover, and further details about the acquisition, together with voting details, will be published within 28 days. The market has already priced in the deal's success, sending Brewin's share price up over 60 per cent to 512p.
As at 28 February, Brewin had £55bn of assets under management, so RBC’s offer values Brewin at 2.8 per cent of its assets. Peel Hunt said this put the offer price at 21 times consensus earnings estimates (albeit this would be subject to mark to market adjustments) - an increase from a P/E ratio 13.4 times at the end of its financial year last September, according to the broker.
RBC, one of Canada’s largest lenders, said it aimed to combine Brewin with its existing UK wealth business, which would bring combined assets to £64bn. Brewin will initially be managed as a stand-alone subsidiary, but over time it is expected that the two brands will be combined. Analysts at Berenberg said the deal, when complete, will give RBC Wealth Management approximately a 7 per cent market share of the £1trn UK wealth market.
“There is no explicit detail on cost synergies, but there will be some overlap and therefore some limited headcount reductions are expected,” said analysts at Peel Hunt.
The deal comes on the heels of Raymond James’ acquisition of Charles Stanley - another UK wealth manager founded in the 18th century - which completed in January. The US financial group’s offer for Charles Stanley last July was made a 43 per cent premium to its closing price the previous day.
RBC’s bid could pave the way for further takeovers as other listed wealth management peers trade at a material discount to the price the Canadian bank is offering for Brewin.
Robin Beer, chief executive officer of Brewin Dolphin, said: "The Brewin Dolphin board is pleased to recommend the offer by RBC in the interests of our shareholders, our clients, our people and our business partners. Building on the strong organic growth that we have achieved to date, the combined business will create an attractive platform for future growth.”
