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Rathbones and Smith & Williamson in £55bn merger talks

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Rathbones and Smith & Williamson in £55bn merger talks

Rathbones and Smith & Williamson are in merger talks in a deal that would create a £55 billion wealth giant.

The deal would value the combined company at £2 billion with Rathbones, which has £36 billion of assets under management (AUM), the dominant partner with a market value of £1.4 billion, according to Sky News.

Smith & Williamson, which runs £19 billion, has been valued at £600 million.

The transaction will be structured as a Rathbones takeover and will be an all-share deal.

Rathbones confirmed the talks in a statement. Company secretary Ali Johnson said: 'Rathbones confirms that it is currently in exclusive discussions with the Smith & Williamson group of companies regarding a possible all share merger of the two groups.

'While these discussions have been underway for some time and the boards of both Rathbones and Smith & Williamson are confident that the combination would bring meaningful benefits for the stakeholders of both businesses, discussions are ongoing and there can be no certainty any transaction will be agreed.

'However, if agreed, any such transaction will be subject to the approval of shareholders. A further announcement will be made as and when appropriate.'

The combined group would see Rathbones, led by CEO Philip Howell (pictured), able to broaden its capabilities, adding Smith & Williamson’s tax and accounting practice to its suite of services. These would be complementary to Rathbones' private office, while both firm’s asset management arms would be merged to create a significant player.

It is rumoured Canadian firm AGF, which owns 33% of Smith & Williamson, has been looking for an exit for some time- the firm pulled its plans to float in summer 2007 as the financial crisis took hold.

AGF is a C$36 billion (£22 billion) financial conglomerate led by Blake Goldring, who is listed personally as the largest shareholder in Smith & Williamson. The majority of the company is owned by senior management and staff.

FTSE 250-listed Rathbones is 14.7% owned by staff, according to its latest annual report.

The two companies in numbers

In the two firms’ last sets of annual results Rathbones pre-tax profits of £50.1 million over the 12 months to the end of December, down from £58.6 million in 2015. Revenue rose by 9.6% to £251.3 million over the same period and total AUM by 17.1%.

Meanwhile, Smith & Williamson’s adjusted operating profit rose 12.8% to £40.6 million over the 12 months to the end of April 2017. Group operating income rose by 9.9% to £244.6 million, with its AUM rising 17.5% and its funds under administration by 39.4%.

Both firms have considerable history, with Rathbones tracing its roots to the 1720s in Liverpool, while Smith & Williamson was founded in Glasgow in 1881.

The two also have significant national branch networks, with Smith & Williamson having 11 across the UK, Ireland and Jersey, housing more than 1,700 staff. Rathbones operates out of 15 offices throughout the UK and Jersey, and has just over 1,100 staff.

There is therefore considerable overlap between their branch networks, with both companies having offices in London, Birmingham, Bristol, Glasgow and Jersey.

However, if the merger goes through, it would give Rathbones a presence in a number of new locations, including Belfast, Cheltenham and Guildford. Similarly, the deal could enable Smith & Williamson to gain a toehold in the likes of Edinburgh, Cambridge, Aberdeen, Liverpool and Exeter. 

Consolidation has been a consistent theme in the industry as companies struggle to maintain margins in the face of rising regulatory costs and downward pressure on fees.

Both Rathbones and Smith & Williamson have been contacted for comment. 

 

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