Rathbones has acquired Scottish independent wealth manager Speirs & Jeffrey, increasing its FUM by 18% to £44.5bn.
In an official statement released this morning, the group announced it is to acquire 100% of the issued share capital of Speirs & Jeffrey, Scotland's largest independent wealth manager.
The deal, which is subject to approval by the FCA and is expected to complete in the third quarter of 2018, will increase Rathbones' pro forma funds under management by 18% to £44.5bn.
An initial consideration of £104m has been made, which comprises of £79m cash (funded from a combination of internal cash resources and proceeds from a proposed £60m equity placing) and the issue of one million new Rathbones shares, worth £25m.
The group said further contingent consideration, earn-out payments and incentivisation awards of up to 5.8 million Rathbones shares may also be payable "depending upon the achievement of synergies that deliver additional earnings accretion".
Rathbones' board said it expects underlying EPS accretion of at least 8% and a return on investment of approximately 13% in the third year following completion, while the transaction is expected to be marginally EPS accretive on an underlying basis in the first full year following the acquisition.
It also hopes to achieve run-rate cost synergies of approximately £6m per year within three years, largely from the streamlining of operations and infrastructure, with a total of approximately £3m costs to achieve these synergies over three years following completion.
Meaningful revenue synergies are also expected 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.
Commenting on whether or there will be redundancies, Philip Howell, CEO of Rathbones, said: "As with all of these deals, we are looking to make sure we do the best in terms of operational efficiency so we are looking to optimise our approach to that and there will be redundancies.
"There are no plans for any rapid change however, this is a long term deal and we expect to extract synergies over a two to three year period."
Speirs & Jeffrey is currently responsible for £6.7bn funds under management and employs 38 investment professionals. All of its current directors and managers will join Rathbones, while CEO Russell Crichton will become the group's head of Rathbones Scottish business. Rathbones' Glasgow team will join with Speirs & Jeffrey to consolidate the firm's Glasgow presence, making it the group's largest office after London.
The wealth manager has around 8,500 clients, all of whom will be able to access Rathbones' broader product and service offering including lending, financial planning and dedicated specialist offerings, such as its charities team and ethical investment capability.
Clients will also see continuity of their investment manager and 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.
Howell said the company will keep its name until June 2019, by then which it will be fully entegrated as part of the Rathbones brand.
He 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."
A key player in consolidation in the wealth management sector, Howell added there may also be scope for Rathbones to make further smaller acquisitions.
Russell Crichton, CEO of Speirs & Jeffrey, added: "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."
Meanwhile, Graham Waddell, chairman of Speirs & Jeffrey, said: "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 benefiting from the wider resources of Rathbones, fills me with great confidence for the future."
The news comes after the groups admitted to being in talks regarding an acquisition after press reports came out in April.
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