Rathbone in talks with Smith & Williamson over merger
Wealth manager Rathbone Brothers has confirmed it is in exclusive talks with UK-based financial services provider Smith & Williamson over a possible all-share merger.
The Irish Independent understands that if a deal is agreed it will happen quickly, with negotiations likely to conclude within a fortnight.
The tie-up would create a major new institution with, £50bn under management and around 3,000 staff.
Smith & Williamson has pushed into Ireland in recent years. In 2008 it merged with Oliver Freaney Accountants in Dublin. In 2011 the UK business, which traces its origins back to 1881, lured a number of stockbrokers from Goodbodys to establish a new Irish advisory services and investment management firm.
The venture, led by Cedric Cruess Callaghan, targets well-to-do clients and charities and now has over €500m under management.
The Irish arm of Smith & Williamson snapped up Bloxham Stockbroker’s private clients book in 2012. Mr Cruess Callaghan said the business here is “performing very well”.
While he declined to comment on the status of negotiations between Rathbone and Smith & Williamson, he said the organisations were “very similar, culturally”. He predicted a merger, if agreed, would prove “seamless”. He claimed the potential merger, the latest in a string of tie-ups in the sector, reflected rising compliance costs, and the need to capture greater efficiencies in the face of mounting competition from passive funds such as Vanguard and BlackRock.
The Irish arm of Smith & Williamson, which also includes a pensions business and private bank, is “performing very well”, said Mr Cruess Callaghan.
Smith & Williamson manages more than £19bn for clients.
While the company is majority owned by employees, Canadian investor AGF controls a 30pc slice and has reportedly explored efforts to exit in recent months.
“Whilst these discussions have been under way 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,” Rathbone said in a statement yesterday.
“However, if agreed, any such transaction will be subject to the approval of shareholders.”
Earlier Sky News reported the £2bn merger would be structured as a takeover by Rathbone and attributed a valuation of close to £600m to Smith and Williamson.
The deal, which would bring together two firms employing about 3,000 people, would see Smith and Williamson hand shares in the combined group to its employees who own the
majority of the company, Sky said.
Rathbone said a further announcement would be “made as and when appropriate”.
Last month Rathbone posted a 16.7pc rise in first-half pre-tax profit to £26.6m, boosted by market gains and a rise in assets under management.
In London, City brokers welcomed the potential deal. Peel Hunt analyst Stuart Duncan said excitement was likely to be tempered by challenges in completing a mega-merger.
For Rathbones and Smith & Williamson, a merger is seen as a way to grow in this environment rather than to slash costs, one source said.
As well as managing around £19bn of funds, Smith & Williamson is also one of Britain’s largest accounting firms, meaning a deal would hand Rathbones access to a new pool of advisers. (Additional reporting Daily Telegraph)