Investec Group [LON:INVR] and Rathbones Group LON:RAT have entered into a definitive agreement over an all-share combination which sees Investec’s UK wealth management arm being combined with Rathbones. The deal sees two big names in UK wealth management pooling their collective assets under management and administration into a £100 billion group.
Under the terms of the deal, Rathbones will issue new shares in exchange for 100% of the UK share capital of Investec Wealth & Investment UK. The new group will remain as an independent premium-listed company, operating under the Rathbones brand with Investec Group as a long term, strategic shareholder. Investec Group will end up with 41.25% of the economic interest with voting rights limited to 29.9%.
The deal implies an equity value in the area of £839m for Investec W&I in the UK. The combined entity will draw on 23 client service locations including in the Channel Islands. It is expected to leverage Rathbones’ investment in technology and operating model to deliver an optimal client experience whilst improving operating efficiency across the larger combined business.
“Bringing Rathbones together with Investec W&I UK will create the UK’s leading discretionary wealth manager with approximately £100 billion of funds under management and administration,” said Clive Bannister, Chair of Rathbones. “This transaction not only presents a compelling strategic and financial rationale, but also accelerates Rathbones’ growth strategy. Operating at scale allows the group to offer an even more attractive proposition to clients and colleagues, supporting future growth and creating significant value for Rathbones’ shareholders.”
This is a significant development for the UK wealth management sector, and looks set to deliver significant value creation through the strong fit between the two operating models, with target annual run-rate cash synergies of at least £60 million, driven primarily by cost savings as well as higher net interest income.
“The combination of Investec W&I UK and Rathbones brings together two businesses which have a long-standing heritage in UK wealth management and closely aligned cultures,” explained Investec CEO Fani Titi. “The strategic fit of the two businesses is compelling with complementary strengths and capabilities to enhance the overall proposition for clients. This will be supported by the strategic partnership which offers attractive growth and collaboration opportunities for both groups. The transaction represents a real step-change and long-term opportunity for our UK wealth strategy, underscores our commitment to the UK wealth management market and enhances our UK business as a whole.”
Investec W&I UK is one of the UK’s leading private client wealth managers, with responsibility for £39.7 billion of funds under management/advice (FUMA) as at 30 September 2022, offering holistic wealth management services covering bespoke discretionary investment management together with financial planning and advice to private clients, trusts, charities and pension funds.
The business operates from 15 offices across the UK and Channel Islands. As of 30 September 2022, approximately 74% of FUMA were private client assets with the balance charities and clients introduced by intermediaries.
Investec W&I UK has historically benefited from cross referrals from Investec Bank plc which as at 30 September 2022 had over 6,000 private banking clients and contributed approximately £280 million of FUMA referrals to Investec W&I UK in the 6 months to 30 September 2022. For the year ended 31 March 2022, Investec W&I UK reported profit before tax of £84.6 million and reported gross assets of £589.9 million.
