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Why Rathbone’s Jupiter wealth buy could be very special

by Dylan Lobo on Apr 01, 2014 at 11:23

Why Rathbone’s Jupiter wealth buy could be very special

Rathbone Brothers' capture of Jupiter’s wealth business has been met with a chorus of approval from analysts.

Rathbones was understood to be competing with the likes of Brown Shipley and Close for the private client and charity unit, which it sealed in a £43.5 million deal today.

The wealth firm, which also revealed the acquisition of Tilney's London team today, is funding the deals through a £24.4 million share placing.

The market reacted positively, with shares in Jupiter up 3.4% at 414.6p at 10.55am, while Rathbones was 1.76% higher at £18.46.

Asset retention

One of the questions raised is whether Jupiter’s asset management business will hemorrhage assets as a consequence of the sale. Around 30% the wealth arm’s £2.1 billion in assets are held in Jupiter funds.

Citi analysts Haley Tam and Abhijeet Sakhare are not concerned by this as they repeated their buy rating and 440p price target on Jupiter, which is led by chief executive Maarten Slendebroek (pictured).  

‘The likely retention of these assets by Jupiter funds should be no different after the transaction as to now,’ the pair said in a note to clients.  ‘Suitable Jupiter funds previously chosen for private clients should remain suitable after the deal.’

Core to Rathbones

Canaccord Genuity analysts Robin Savage and Arun Melmane were particularly appreciative on the impact the deal would have on Rathbones, prompting them to upgrade their rating from hold to buy with £19.50 price target.

The pair highlighted that on a pro forma basis the Jupiter and Tilney deals would increase Rathbone’s asset under management by 12.7% to £24.8 billion. 

‘We expect these acquisitions to enhance Rathbone’s FY15e EPS by 3.8% to 130p,’ Savage and Melmane said. 

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