Rathbones to buy Investec W&I in £839m deal

Rathbones to buy Investec W&I in £839m deal to create Britain’s biggest wealth manager with £100bn in assets

  • Investec will become a ‘long-term, strategic shareholder’ in enlarged business 
  • Rathbones shareholders will own 58.75% of group and 70.1% of the voting rights

Wealth manager Rathbones is set to buy Investec’s UK wealth business in an all-share deal valued at £839million, creating a British industry leader with around £100billion in assets.

The deal will see new Rathbones shares issued in exchange for Investec Wealth & Investment as Investec Group becomes a ‘long-term, strategic shareholder’ in the enlarged business, with a 41.25 per cent equity stake and 29.9 per cent of voting rights.

Rathbones CEO Paul Stockton 

Under the terms of the deal, which excludes Investec’s Swiss and International wealth operations, Rathbones shareholders will own 58.75 per cent of the combined group and 70.1 per cent of the voting rights.

Rathbones and Investec said in a joint statement on Tuesday: ‘The Combination brings together two trusted and prestigious UK wealth management businesses with closely aligned cultures and operating models and a shared commitment to client-centric values and sustainable growth.

‘The combination represents a significant value creation opportunity for both Rathbones and Investec Group shareholders.

‘The combination will unlock significant scale benefits through the creation of the UK’s leading discretionary wealth manager with approximately £100billion of funds under management and administration.’

Rathbones shares rose by 2.2 per cent in early trading to 1,924p. 

The enlarged Rathbones Group will target an underlying operating margin in ‘the low 20s’ percentages in 2023 and a return to the ‘high 20s’ in 2024.

It will then target an underlying operating margin of 30 per cent or more in the medium-term.

It will continue to be chaired by Clive Bannister with an executive team led by Rathbones CEO Paul Stockton, but will now include Investec W&I UK CEO Iain Hooley.

Investec Group will appoint two representatives to the board as non-executive directors upon completion, and will be entitled to do so for as long as it holds a stake of at least 20 per cent.

The deal is the latest of many in recent years as the high-growth wealth sector looks to build scale in the face of higher regulatory and technical costs.

‘This is an industry ripe for consolidation and we want to be at the forefront of it,’ Mr Stockton told reporters on Tuesday morning, citing growing inflationary pressures on the sector.

‘This deal is about growth opportunities.’

With regard to potential job losses as a result of the deal, he added: ‘There will be some changes to make but it’s way too early to be talking about details like that.’

The deal is set to ‘unlock significant scale benefits’, the firms added, with the enlarged Rathbones group targeting annual run-rate cash synergies ‘of at least’ £60million ‘driven primarily by cost savings as well as higher net interest income’.

Rathbones will also have a ‘multi-channel distribution capability’ across private clients, intermediaries and charities, through an expanded network in 23 locations across the UK and Channel Islands.

For its part, Investec said the deal enabled it to commit to the UK wealth sector ‘in a capital-efficient manner’, while enhancing its client proposition across banking and wealth management services.

It will also increase the contribution of capital-light, recurring earnings to Investec Group and create ‘sustainable value’ for shareholders.

The groups expect the deal to be completed by the end of the third quarter of this year, subject to regulatory and shareholder approval.

Rathbones chair Mr Bannister said: ‘This transaction not only presents a compelling strategic and financial rationale, but also accelerates Rathbones’ growth strategy.

‘Operating at scale allows the group to offer an even more attractive proposition to clients and colleagues, supporting future growth and creating significant value for Rathbones’ shareholders.’

Investec Group CEO Fani Titi added: ‘The combination of Investec W&I UK and Rathbones brings together two businesses which have a long-standing heritage in UK wealth management and closely aligned cultures.

‘The strategic fit of the two businesses is compelling with complementary strengths and capabilities to enhance the overall proposition for clients. This will be supported by the strategic partnership which offers attractive growth and collaboration opportunities for both groups.

‘The transaction represents a real step-change and long-term opportunity for our UK wealth strategy, underscores our commitment to the UK wealth management market and enhances our UK business as a whole.’