Troubled private client wealth manager Rowan Dartington is to be sold off to a consortium of private investors led by Graham Coxell, former Capita managing director of wealth and distribution services.
RDH, a new company formed to buy Rowan Dartington, will acquire 100% of the Rowan Dartington's issued share capital, subject to approval by parent Astaire Group's shareholders, a meeting convened by Evolve, its 53% holding company, and the FSA.
The board of Astaire said it believed there was significant scope for improvement in Rowan Dartington's performance under new ownership following the sale. They pointed to the appointment of a chief executive with a significant shareholding in the new structure, a reincentivised employee pool, additional capital and the ability to recruit new managers able to bring new clients to the firm.
In fact, incentive arrangements for employees comprise the investment of £200,000 for loan notes and up to 15% of the issued share capital of RDH. The consortium, led by Coxell, will also invest a further £600,000 of working capital into the company. The consideration will comprise £1 million in loan notes and shares in RDH, representing 30% of its equity share capital and no cash consideration will be payable on completion.
The remaining 70% of the new company will be owned by the consortium led by Coxell and existing staff of Rowan Dartington, who will collectively invest £800,000 in loan notes to provide the business with working capital going forward. The loan notes are zero coupon and will be repayable on the fifth anniversary of completion or if there is an earlier sale of the company.
The company has endured a difficult year after finding a £1.4 million black hole on its balance sheet as a result of shortcomings with its back office system, resulting in a £511,000 fine from the FSA.
Over the last 12 months, efforts have been made to reduce operating costs, although the statement noted that Rowan Dartington had been hit with a £250,000 hit as a result of the FSCS levy. The company currently manages around £227 million and is currently operating around a break-even level.
In light of this, Rowan Dartington's regulatory capital level will be tested at completion and Astaire will make a payment to RDH if it is below £1.3 million, while an additional consideration of up to £1 million in cash will be payable to Astaire should Rowan Dartington locate any of the irrecoverable debtor balances prior to 30 June 2011. On completion, Astaire will pay approximately £650,000 in cash into an escrow account, which will be used to fund the purchase of certain Isambard investments.If a contingent liability crystalises at RDH and Astaire elects to fund the cash costs of this, Astaire has the right to subscribe £1 million in cash for a further £200,000 in loan notes and will have the right to appoint a director to the board of the new company.
The move follows the announcement that Astaire will sell Dowgate Capital Stockbrokers after the staff enacted a management buy out (MBO) with Beavis Morgan LLP, a company recently set up by ex-Vantis employees.
Astaire announced to the stock market that it had sold Dowgate to 3B Capital, a new company formed by Dowgate Capital employees and Beavis Morgan. Following the completion of the sale of both businesses Astaire Group will become an 'investing company', following the agreement to sell Astaire Securities to Sandfire Capital, the parent company of Canada-based securities firm NCP Northland Capital Partners back in October.