UK wealth manager Rathbones has agreed to buy rival Investec Wealth & Investment UK for £839mn, creating a group that will oversee more than £100bn of assets.
The merger will bring together two of Britain’s biggest wealth managers under the Rathbones brand, which traces its roots back to the early 1700s.
The deal comes as wealth managers seek to bulk up in the face of rising costs and pressure on fees from cheap index-tracking funds and increasing competition.
Paul Stockton, chief executive of Rathbones, told the Financial Times: “The forces of consolidation have been weighing on the industry for some time. We’re all facing inflationary pressure, so there are a number of players in the market that will have the same sort of challenges.”
He added that from a “cultural perspective”, [Investec] is very closely aligned to Rathbones and that the deal would create the largest discretionary wealth manager in the UK in terms of funds under management.
Under the terms of the all-share agreement, Investec Group will own 41 per cent of the combined group but with voting rights to 29.9 per cent. Shares in Rathbones were up 2 per cent in early morning trading.
The deal gives Investec an implied equity value of £839mn and includes its wealth and investment businesses in the UK and Channel Islands. However, it excludes Investec Bank, based in Switzerland, and the international wealth business, both of which remain wholly owned subsidiaries of Investec Group.
Analysts at Jefferies said the deal would bring £40bn of funds under management to the new, enlarged group across 40,000 clients. They added Rathbones aimed to achieve £60mn of annual synergies, partly through combining technology and shrinking the property portfolio.
Royal Bank of Canada’s analysts described it as a “transformational deal at highly attractive terms” that will boost group profits by about 80 per cent.
Fani Titi, Investec Group chief executive, said: “We’ve seen over the last three-five years a level of consolidation. The bigger you are, the better you can invest in these capabilities and fight for talent in the industry, and the better you’re able to operate more efficiently.”
He added that the deal was a “commercial partnership between two businesses to offer both banking and wealth management”.
Rathbones and Investec offer wealth and investment management services to private investors, from banking and tax services to pensions advice.
The group said it would continue to aim for underlying operating margin in the low 20 per cent range this year, increasing to the high 20s next year. It will target an operating margin of 30 per cent or more in the medium term, driven by the benefits of the combination.
