Tuesday 17 July 2018

Merrion Capital takeover deal to be signed 'imminently'

Goodbody is currently owned by a combination of management and financial services group Fexco. Stock image
Goodbody is currently owned by a combination of management and financial services group Fexco. Stock image
Donal O'Donovan

Donal O'Donovan

A takeover of Dublin-based stockbroker Merrion Capital by the Irish arm of US brokerage Cantor Fitzgerald is imminent, the Irish Independent has learned.

A deal will end years of will-they-won't-they speculation about the two firms. Terms of a deal are understood to have been circulated in recent days to Merrion shareholders and to value the business north of €13m. Neither Merrion nor Cantor Fitzgerald could be reached for comment.

US-owned Cantor Fitzgerald lost out four years ago in a takeover battle for Merrion.

Instead the stand-alone business was bought by a group of the firm's own management, led by Patrick O'Neill, with backing from Dublin-based private equity firm Tetrarch Capital - best known for its hotels and property investments.

Merrion has since rebranded its main customer arm as Merrion Private in a shift from pure stockbroking to wealth management, where it has around €2bn in assets under management.

In August last year, the Irish Independent reported that senior managers at Cantor Fitzgerald and Merrion had again discussed the potential for consolidation as a response to rising regulatory costs, but did not advance to detailed merger talks. The situation is understand to have moved on significantly this time around with an announcement now imminent, according to a source with inside knowledge of the situation.

A deal will require approval from the Central Bank, as regulator.

Cantor Fitzgerald is known to be targeting growth in Ireland, after the US brokerage acquired the former Dolmen Securities in 2012.

The chief executive of Cantor Fitzgerald Ireland, Ronan Reid, has previously warned that the increasingly tough regulatory environment would force firms, including his own, to scale up to carry the rising costs.

The Dublin-based business has completed a series of bolt-on deals, including of L&P Group, an advisory service for charities, trusts, not-for-profit organisations and religious orders.

It also took over administration of Rabo Direct's Irish managed funds last year after the Dutch bank exited the market.

The acquisition of Merrion is on a larger scale, however. That will create synergies but it's understood it will also likely see some senior exits from Merrion.

The tie-up comes amid a flurry of activity in Ireland's relatively small broker sector. Cantor Fitzgerald might have expected competition from Investec and Goodbody Stockbrokers in bidding for Merrion.

However, both larger firms are themselves the focus of takeover actions. Goodbody Stockbrokers is locked in negotiations to thrash out a sale to Chinese state-owned suitors, Zhong Ze Culture Investment Holdings, a subsidiary of the Aviation Industry Corporation of China.

Goodbody is currently owned by a combination of management and financial services group Fexco.

The proposed deal values Goodbody at €150m, but has so far failed to proceed as far as the contracts stage.

South Africa-headquartered Investec's Irish arm is also on the block. AIB was in the hunt for the business, with interest also from overseas financial institutions and private equity firms.

The wave of deals has followed last year's €137m sale of the Irish Stock Exchange, which delivered a windfall for the five stockbroking firms that owned the bourse.

Irish Independent

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