Schroders Strikes $644 Million Deal To Buy UK's Cazenove In Wealth Management Push

Eliane Chavagnon

26 March 2013

Schroders has agreed to buy UK-based Cazenove Capital, the independent investment firm, for £424 million (about $644 million), in a move that will considerably boost its private banking operations and other lines of business such as investment management, financial planning, deposit-taking and lending services.

The London-based fund manager said it will pay £395 million for the purchase of Cazenove - valued at 135 pence in cash per ordinary share - along with £29 million as the effective future cost of existing deferred share compensation arrangements for Cazenove employees.

If the deal does go ahead, Schroders will see its assets under management rise by £17.2 billion to £229.2 billion, while adding £5.1 billion to its funds business and, ultimately, creating a £28.4 billion private banking business. Earlier this month, the UK-listed firm reported that subdued market activity and some business outflows reduced net revenues at its private banking arm in 2012; net revenue declined 17 per cent last year from 2011 to stand at £94.4 million ($141.7 million).

Upon completion of the transaction, Andrew Ross - chief executive at Cazenove - will serve as head of UK private banking, reporting to Philip Mallinckrodt, Schroders’ group head of private banking.

Cazenove said that its charity and private clients will continue to be looked after by their existing teams. Meanwhile, the firm's portfolio managers in UK and European equities, fixed income, multi-manager and absolute return strategies will join Schroders’ existing investment team.

Benefits

Michael Dobson, CEO at Schroders, said he believes that the transaction will create long-term value and benefits for clients, shareholders and employees.

“The proposed combination with Schroders brings together two long-standing organisations with close cultural values,” added David Mayhew, chairman of Cazenove.

Mayhew said the deal will provide an enhanced proposition for his firm’s private wealth management and charities clients, as well as being a “strategic fit” for its investment funds business. “I and the Cazenove Capital board unanimously recommend the transaction to our shareholders,” he said. Ross added that the affiliation is also an “excellent fit” for the firm's wealth management businesses in the Channel Islands and Asia.

Meanwhile, Schroders said the acquisition will provide economies of scale across the group - primarily in UK funds distribution and infrastructure - which it anticipates will enable it to achieve pre-tax cost synergies of between £12 million and £15 million per annum.

The UK-listed firm has been shortlisted for a number of WealthBriefing Awards 2013, to be announced in London on 2 May.