Acquisition

RNS Number : 2780R

Brooks Macdonald Group PLC

16 November 2012

 



16 November 2012

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND OR AUSTRALIA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN SUCH JURISDICTION.

BROOKS MACDONALD GROUP PLC

Acquisition of Spearpoint and Placing

Brooks Macdonald Group plc ("Brooks Macdonald", "the Group" or "the Company"), the AIM listed integrated wealth management group, today announces the acquisition of Spearpoint (Spearpoint Limited and Spearpoint Retirement Services Limited), a Jersey and Guernsey based provider of discretionary fund management with stock broking and retirement planning capabilities. It is expected that the Acquisition will complete on 19 November 2012.

Acquisition of Spearpoint  

·     Spearpoint is one of the leading integrated wealth management businesses in the Channel Islands with funds and assets under management of approximately £1.1bn;

·     The Combined Group has discretionary funds under management of approximately £4.5bn (excluding advisory, property and third party administration assets); and

·     Spearpoint is a good synergistic fit with the Group's existing growth strategy, adding important access to an expanding international pensions market.

Terms of Acquisition and Consideration Structure

·     Initial consideration of approximately £23.1m on a cash free debt free basis payable in a mixture of cash and equity.

·     Deferred consideration will be payable in cash in November 2014.  If the value of Spearpoint's discretionary funds under management were to remain at approximately their current levels, the Company would expect the deferred consideration to be approximately £4 million.

·     However, based on the Company's growth projections for Spearpoint's discretionary funds under management over the period to November 2014, the Group expects to pay an additional approximate £5m of deferred consideration over and above the £4m figure.

Placing

·     The Company proposes to raise £21.5m by way of a vendor placing of 1,869,566 New Ordinary Shares at the placing price of 1,150 pence per share.

·     The net proceeds of the Placing will be used to pay part of the initial consideration.

·     The Placing received strong support from a mixture of existing and new institutional shareholders.

Financial Highlights

·     The Acquisition is expected to be immediately earnings enhancing.

·     Spearpoint reported pre tax profits of £3.91m on revenues of £11.42m for the year ended 31 December 2011.

Chris Macdonald, Chief Executive of Brooks Macdonald Group commented:

"The acquisition of Spearpoint is a major step forward for the Group and captures an opportunity we have been seeking for a number of years.  It adds scale, offshore and international capability together with the acquisition of a strong investment management and pensions team.

"We look forward to welcoming Spearpoint's clients and staff to Brooks Macdonald. There is a good synergistic and cultural fit with our existing growth strategy and business.

"We are confident that the Combined Group will be a leading presence in UK wealth management and that the acquisition will be immediately earnings enhancing."  

John Davey, Chief Executive of Spearpoint said:

"We are delighted to be joining the Brooks Macdonald Group. There is a strong fit in terms of investment management style and culture.

"Brooks Macdonald's proven marketing and distribution and well established brand provide us with the tools to focus on growth.

"Everyone at Spearpoint is very excited about the opportunities that becoming part of Brooks Macdonald present."  

An analyst meeting will be held today at 9.15am for 9.30am at the offices of Canaccord Genuity, 88 Wood Street, London, EC2V 7QR. For further information please contact MHP Communications on 0203 128 8100 or [e-mail] 

Enquiries

Brooks Macdonald Group PLC

Chris Macdonald - Chief Executive                                                                     020 7499 6424

Simon Jackson - Finance Director                                                    www.brooksmacdonald.com

Canaccord Genuity Limited

(Financial adviser, Nomad & Broker)

Bruce Garrow / Piers Coombs                                                                            020 7523 8350                                                         

MHP Communications

Reg Hoare / Barnaby Fry / Simon Hockridge / Giles Robinson                         020 3128 8100

Notes to editors

Brooks Macdonald Group plc is an AIM listed, integrated, wealth management group. The group consists of four principal companies: Brooks Macdonald Asset Management  Limited, a discretionary asset management business; Brooks Macdonald Funds Limited, a fund management business; Brooks Macdonald Financial Consulting Limited, a financial advisory and employee benefits consultancy; and Braemar Estates (Residential) Limited, an estate management company.

BROOKS MACDONALD GROUP PLC

Acquisition of Spearpoint and Placing

Introduction

Brooks Macdonald Group plc, the AIM listed integrated wealth management group, today announces the acquisition from Spearpoint Holdings Limited of Spearpoint (Spearpoint Limited and Spearpoint Retirement Services Limited).  It is expected that the Acquisition will complete on 19 November 2012.

Spearpoint is a well established Jersey- and Guernsey-based provider of discretionary fund management with stock broking and retirement planning capabilities. Spearpoint is one of the leading integrated wealth management businesses in the Channel Islands with funds and assets under management of approximately £1.1bn. The Combined Group will have discretionary funds under management of approximately £4.5bn (excluding advisory, property and third party administration assets).

The Board believes Spearpoint represents a good synergistic and cultural fit with the existing Brooks Macdonald growth strategy and business and the Acquisition is expected to be immediately earnings enhancing. It expands the Group's geographical footprint, enhances its offshore capabilities and provides future growth and distribution opportunities.

About Spearpoint

Spearpoint is an independent investment boutique established in 2007 with offices in both Jersey and Guernsey.  It operates in four areas of expertise: discretionary fund management, retirement services, advisory fund management and execution only stockbroking. It retains strong links with local and international trust companies.

The core team had worked together for approximately 10 years before forming the business.  Spearpoint has 54 staff, most of whom are shareholders in Spearpoint. The well regarded and stable investment management team and high quality back office have focused on delivering a strong level of client service and on tailoring a personalised service to investment management clients.

The business is led by its Chief Executive Officer, John Davey and a senior management team.

As at 30 September 2012, Spearpoint had £614m of discretionary funds under management, £95m of funds under management and £370m of advisory funds under management making a total of approximately £1.1bn of assets and funds under management.  There were 545 execution only stockbroking accounts as at 30 September 2012.

In its financial year ended 31 December 2011, Spearpoint reported a profit before tax of £3.91m on revenues of £11.42m. In the nine months ended 30 September 2012, Spearpoint has made a profit before tax of £2.5m on revenues of £8.4m.  Net assets as at 30 September 2012 were approximately £7m, with approximately £5m of liquid cash.

Terms of the Acquisition and Consideration Structure

The total consideration will consist of an initial payment of approximately £23.1m on a cash free debt free basis, which will be satisfied by the issue of 418,627 new Ordinary Shares to the Vendor, for a total deemed value of approximately £5.45m, with the balance paid in cash.  Deferred consideration will be payable in cash in November 2014.  If the value of Spearpoint's discretionary funds under management were to remain at approximately their current levels, the Company would expect the deferred consideration to be approximately £4 million.  However, based on the Company's growth projections for Spearpoint's discretionary funds under management over the period to November 2014, the Group expects to pay an additional approximate £5m of deferred consideration over and above the £4m figure. The total consideration payable is capped at £45m.

Reasons for and benefits of the Acquisition

The Board believes that the Acquisition is a major step forward for the Group and captures an opportunity the Board has been seeking for a number of years.  It adds scale, offshore and international capability together with the acquisition of a strong investment management and pensions team. There is a good synergistic and cultural fit with the existing Group's growth strategy and business and the Acquisition is expected to be immediately earnings enhancing.

Since listing on AIM in 2005, the Group has followed an aggressive path to growth whilst continuing to run the business in a conservative manner. It has employed three principal strategies for growth; organic growth, organic investment including acquisitions and the development of its product and service offering.

In line with this strategy, the Group has made a number of acquisitions which have been successfully integrated. These have included: the investment management team of Clarke Willmott which enabled the Group to establish a Taunton office in 2011, increasing its UK network to seven offices; and Braemar Group, a property and fund management business that was acquired in July 2010, enabling Brooks Macdonald to broaden its range of niche funds whilst increasing its exposure to property and alternative asset management.

At the same time, increasing regulatory and compliance costs, as well as the impact of the financial crisis on many financial services institutions, has led to a number of acquisition opportunities becoming available in the wealth management sector. The Board believes that this consolidation process is likely to continue.

The Board therefore believes there is a strong strategic rationale to the Acquisition for the following reasons:

·     The Acquisition immediately gives the Group international and offshore capability, whilst catering for the Group's existing offshore clients;

·     It provides further steps to a wider UK footprint, as the asset management business will now operate from nine offices (being London, Manchester, Edinburgh, Fareham, Tunbridge Wells, Taunton, York, Guernsey and Jersey);

·     It builds further scope within the Group's Funds business, with the combination of Brooks Macdonald's seven funds and Spearpoint's seven funds, boosting the funds business to a combined £320m; 

·     It enhances intermediary distribution opportunities particularly in relation to integrating Spearpoint into Brooks Macdonald's extensive network of strategic alliances and new business introducers; and

·    It provides an embryonic opportunity in Retirement Services to take advantage of the growing international pensions market.

Analysis of combined discretionary funds under management

As at 30 September 2012:

	Brooks Macdonald	Spearpoint	Combined totals
Discretionary - Private Clients	£3,526m	£614m	£4,140m
Discretionary - Funds	£225m	£95m	£320m
Total discretionary funds under management	£3,751m	£709m	£4,460m

The above excludes advisory, property and third party administration assets managed by Brooks Macdonald and Spearpoint.

Integration plans

The Group has an established integration track record following a number of acquisitions in recent years, including those of Braemar Group and the Clarke Willmott investment management team. 

The shape of the Group and its product and service offering have evolved following these acquisitions, including through the addition of the funds and specialist estate management businesses of Braemar.  The addition of Spearpoint's team now adds a new growth strategy, namely an international pensions market presence, which will be rebranded at the start of 2013 as Brooks Macdonald International.  As a result the Combined Group will now offer the following products and services:

Brand	Product / Service
Brooks Macdonald Asset Management	Discretionary private client asset management
Brooks Macdonald Financial Consulting	Financial advisory and employee benefits consultancy
Brooks Macdonald Funds	Fund management
Braemar Estates	Specialist estate management
Brooks Macdonald Investment Services	Provision of investment administration
Brooks Macdonald International	Provision of offshore investment, management, retirement solutions and administration

It is intended that Spearpoint's key management and staff will be retained, led by John Davey, Chief Executive Officer and co-founder. Accordingly, lock-in arrangements for key personnel for a period of 12 months have been put in place. The Group intends to invest in new staff for business development and client facing roles, to enable Spearpoint senior management to refocus on growing the business.

The Fund offerings of Brooks Macdonald and Spearpoint will be combined and repositioned. This should improve the overall marketability of the range of Funds, whilst providing an opportunity to improve margins.

A phased integration of branding and marketing will take place together with integration of front and back office systems and investment processes where appropriate. The Board believes that there will be opportunities to reduce costs through future synergies. The expectation that the Acquisition will be immediately earnings enhancing excludes any benefit from future synergies.

Current trading

As announced on 19 October 2012, the Group had an encouraging first quarter of its new financial year with an increase in funds under management, continuing its track record of growth.

As at 30 September 2012, Brooks Macdonald's discretionary funds under management totalled GBP £3.751 billion. This represented an increase of 6.5% compared to 30 June 2012 (£3.520bn). As a comparison, the APCIMS balanced index rose by 2.45% over the quarter. The above numbers include Brooks Macdonald Funds, but exclude Braemar Estates and the Group's new investment management administration service.

Details of the Placing

The Company proposes to raise £21.5m (before expenses) by way of the Placing. The net proceeds will be used to pay part of the initial consideration. The Placing Price of 1,150 pence represents a discount of 8.0 per cent. to the closing middle market price of 1,250 pence per Ordinary Share on 14 November 2012, being the latest practicable day prior to the publication of this announcement. The 1,869,566 new Ordinary Shares to be issued under the Placing will represent 14.1 per cent. of the issued share capital of the Company as enlarged by the issue of all of the New Ordinary Shares.

The Company has entered into the Placing Agreement with Canaccord Genuity in relation to the Placing.  The Placing is conditional, among other things on (i) the Placing Agreement becoming unconditional in all respects (save for Admission) and the Placing Agreement not having been terminated by Canaccord Genuity in accordance with its terms and (ii) Admission becoming effective by not later than 8.00 a.m. on 19 November 2012 (or such later time and date as the Company and Canaccord Genuity may agree, not being later than 7 December 2012).

Application has been made for the New Ordinary Shares to be issued under the Placing and the Acquisition to be admitted to trading on AIM.  It is expected that Admission will become effective, and that trading in the New Ordinary Shares will commence on AIM at 8.00 a.m. on 19 November 2012.  The New Ordinary Shares will, upon issue, be credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid on the Ordinary Shares by reference to a record date following on or after the date of their allotment and issue and otherwise on Admission will be identical to and rank pari passu in all respects with the existing Ordinary Shares then in issue. Following Admission, the total number of Ordinary Shares in the Company in issue will be 13,219,958, with each share carrying the right to one vote. The Company holds no shares in treasury. Therefore, the total number of shares carrying voting rights in the Company in issue will be 13,219,958.

-END-

This announcement is for information purposes only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice in any jurisdiction.

Canaccord Genuity Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Brooks Macdonald Group plc, as financial adviser, nominated adviser and broker to Brooks Macdonald Group plc, and for no one else in connection with the matters referred to in this announcement. Canaccord Genuity Limited will not be responsible to anyone other than Brooks Macdonald Group plcfor providing the protections afforded to customers of Canaccord Genuity Limited or for providing advice in relation to the matters referred to herein.

The information contained in this announcement is not for release, publication or distribution, directly or indirectly, to persons in the United States, Canada, Japan, the Republic of South Africa, New Zealand or Australia or any jurisdiction in which such publication or distribution is unlawful and should not be distributed, forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of local securities laws or regulations. The New Ordinary Shares to be issued in relation to the Placing have not been and will not be registered under the United States Securities Act of 1933, as amended, or under the laws of any state of the United States. This announcement does not constitute an offer to sell or issue, or the solicitation of an offer to buy or subscribe for, securities in any jurisdiction in which such offer or solicitation is unlawful and should not be relied upon in connection with any decision to acquire New Ordinary Shares to be issued in relation to the Placing or other securities in the capital of the Company. There will be no public offer of Ordinary Shares to be issued in relation to the Placing in the United Kingdom or elsewhere. The availability of the Placing to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction and such persons should inform themselves about and observe any applicable requirements.

Definitions

"Acquisition"	the acquisition of the entire issued share capital of each of Spearpoint Limited and Spearpoint Retirement Services Limited by the Company
"Admission"	the admission of the New Ordinary Shares to be issued under the Placing to trading on AIM
"AIM"	AIM, a market operated by the London Stock Exchange
"AIM Rules"	the AIM Rules for Companies and the AIM Rules for Nominated Advisers published by the London Stock Exchange
"Board"	the board of directors of the Company
"Canaccord Genuity"	Canaccord Genuity Limited, 88 Wood Street, London EC2V 7QR
"Combined Group"	the Group as enlarged by the Acquisition
"Completion"	completion of the Acquisition in accordance with the terms of the share purchase agreement dated today's date between, among others, the Company and the Vendor
"Group"	the Company and its subsidiary undertakings
"London Stock Exchange"	London Stock Exchange plc
"New Ordinary Shares"	the 2,288,193 new Ordinary Shares to be issued to the Vendor as consideration shares and to placees under the Placing
"Ordinary Shares"	the ordinary shares of 1 pence each in the capital of the Company
"Placing"	the placing of 1,869,566 new Ordinary Shares with placees at the Placing Price
"Placing Agreement"	the placing agreement dated today's date between the Company and Canaccord Genuity in relation to the Placing
"Placing Price"	1,150 pence
"Vendor"	Spearpoint Holdings Limited

 

END

 

 

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