By Scott Kanowsky
Investing.com -- London-based investment firm Rathbones Group (LON:RAT) has agreed to buy Investec's (LON:INVP) U.K. wealth and investment division in an all-share deal that values the unit at about £839 million (£1=$1.1249), the companies announced on Tuesday.
The companies said in a joint statement that the merger will create a wealth management player that will oversee approximately £100B in assets.
"This transaction not only presents a compelling strategic and financial rationale, but also accelerates Rathbones’ growth strategy," said Rathbones chair Clive Bannister.
"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."
Under the terms of the agreement, Investec will be given 29.9% of Rathbones' ordinary voting share capital, as well as convertible non-voting shares. Investec's total economic interest in Rathbones will be 41.25%.
Rathbones' shareholders, meanwhile, will own 58.75% of the combined group, including 70.1% of voting rights.
Bannister will remain chair of the new entity, while Rathbones Chief Executive Officer Paul Stockton is set to helm an executive team that will include Investec wealth and investment U.K. boss Iain Hooley. A joint steering committee comprising senior leaders from both Rathbones and Investec will also be created to supervise the integration of the two businesses.
Rathbones said the move will lead to annual cash synergies of at least £60M, adding that it is expected to be accretive to underlying earnings per share in the first full year after its completion.
Shareholders in Rathbones will be asked to sign off on the tie-up at a general meeting in the second quarter of this year. The deal, which also needs regulatory approval, is expected to be completed early in the fourth quarter.
Analysts at RBC called the merger an "ambitious but logical" step for Rathbones, noting that the estimated synergies could enhance the future attractiveness of the combined group.
Shares in Rathbones climbed in early trading on Tuesday.