Following reports that British wealth manager, Brewin Dolphin (BRW), was in discussions with Investec to acquire Investec's wealth management business in Ireland, the British company confirmed the same on Sunday. In a statement, the company said that, though discussions were ongoing, there can be no certainty that a transaction will be agreed. Brewin Dolphin, which manages £35 billion of client assets, said it was in exclusive talks with Investec over the potential acquisition with a market price tag of up to €60 million.
Investec’s potential sale has also attracted interest from other international players; Brewin Dolphin is amongst the companies eying with AIB and Rathbone also interested to buy private client stockbroking business of Investec. According to sources, the company is attracting interests from other overseas groups that have not yet set up a business in Ireland. Bank of Ireland, though now believed to be out of the race, was an early contender. Rathbone, AIB, and Brewin Dolphin did not comment.
If the talks were successful, it would mark the company's second deal in Ireland in the past eight years and would help consolidate Brewin Dolphin's position in the country. In 2011, the company had bought Irish fund manager, Tilman, in a transaction valued at up to €36 million. The deal would also strengthen the UK-listed company's asset base during a tough period for wealth managers as many British wealth managers have recorded heavy client outflows. This outflow has been driven by investor's caution amid widespread uncertainty about the country's economic future after it leaves the EU.
The company in January had reported that over the previous quarter, its total assets had fallen nearly 8 per cent to £39.5 billion. At the time, David Nicol, company's chief executive, had said that the last quarter of 2018 had been affected by ongoing macroeconomic uncertainty and lower market levels. He also added that the client activity had slowed due to nervousness among investors and financial advisors. During the quarter, the total income also declined by 1.6% to £77.7 million, with core income and total discretionary income declining by 0.8% and 1.2%, respectively.
Share Price Commentary
Daily Chart as at April-15-19 (Source: Thomson Reuters)
On April 15, 2019, BRW shares closed at GBX 329.80, down by 0.30 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 392.20/GBX 286.70. At the time of writing, the share was trading 15.91 per cent lower than its 52w High and 15.03 per cent higher than its 52w low. On the valuation front, the stock was trading at a trailing twelve months PE multiple of 15.8x as compared to the industry median of 12.7x. The company's stock beta was 0.85, reflecting less volatility as compared to the benchmark index. The outstanding market capitalisation was around £939.94 million with a dividend yield of 4.94 per cent.
According to the analysts, the exclusivity of the deal talks is essential as many companies are trying to buy the division. The potential deal would help Investec, which is a distinctive specialist bank and asset manager, to offload a non-core asset. For Brewin, the acquisition would help it to expand a client base that is in line with its target profile and would be another example of discretionary managers expanding controlled distribution.
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