Rathbones pulls out of Smith & Williamson merger talks

Talks over a proposed £2bn merger between fund management firm Rathbone Brothers and Smith & Williamson have ended with no deal struck, reports Calum Fuller

In August, both parties confirmed they were in ‘exclusive talks’ over a deal which gave Rathbones a market value of approximately £1.4bn and a value of approximately £600m to Smith & Williamson.

Rathbones manages £32bn of client funds through Rathbone Investment Management.

Smith & Williamson, meanwhile, is somewhat unusual in that it operates both as a fund manager and an accountancy firm. It manages some £19bn in funds for clients, while according to Accountancy’s Top 75 firms survey, the firm’s accounting and tax operation has a fee income of £222.5m.

Smith & Williamson said in a statement that prior to negotiations commencing, it had been pursuing the possibility of listing on the stock exchange.

It said: ‘Further to the recent announcement made to the stock exchange by Rathbones, we can confirm that merger discussions have ended.

‘Following our growth and business development in recent years, the Board had agreed to prepare the company for a potential stock market listing. While we were pursuing this course, we were approached by Rathbones. After careful consideration, we have been unable to reach agreement on terms which would be in the best interests of all our stakeholders. 

‘As part of our preparation for a potential listing we have developed a strategy to deliver growth across all our business lines and further enhance our position as a leading adviser to private clients and their business interests.

‘This will be achieved by continued investments in talent, infrastructure, client experience and a number of new initiatives to strategically engage with existing and new client groups, creating value for shareholders as our business grows.’

For its part, Rathbones chief executive Philip Howell said: ‘We continue to believe that our proposition was both a compelling strategic and value creation opportunity for all Smith & Williamson's stakeholders. The potential combination was intended to accelerate Rathbones' existing strategy, but ultimately we were unable to agree terms that offered our shareholders an appropriate balance of risk and reward. Rathbones remains confident in its strategy and will continue to look for growth opportunities in the sector and assess them with discipline."

‘Rathbones has incurred a non-underlying charge of approximately £5m in 2017 for expenses associated with the prospective transaction, of which £1.8m was reported within other expenses in our interim statement for the six months ended 30 June 2017.’

Blake Goldring, chairman and CEO of AGF Management, Smith & Williamson’s largest shareholder, said: ‘AGF will actively pursue alternatives to realize value in its investment in Smith & Williamson for the benefit of AGF shareholders. This process reaffirms our position that there is a substantial amount of value in Smith & Williamson as a leading UK based private client investment management, financial advisory and accounting group.’ 

Report by Calum Fuller

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