U.K. fund manager Smith & Williamson has walked away
from a potential merger with rival Rathbone Brothers, which
would have created an investment firm with £56 billion
($72.6 billion) in assets.
Smith & Williamson, which currently manages £19
billion, signaled on Friday that it would, instead, be seeking
a stock market listing after it became clear that the two
parties had failed to agree on proposed merger terms.
In a written statement, a spokeswoman for Smith &
Williamson confirmed that the merger discussions have ended,
adding that the business was intending to revert to an early
plan for a stock market float.
Following our growth and business development in
recent years, the board had agreed to prepare the company for a
potential stock market listing, she said. While we
were pursuing this course, we were approached by Rathbones.
After careful consideration, we have been unable to reach
agreement on terms which would be in the best interests of all
According to a Sky News report earlier this week, rival investment
management group Tilney which boasts around £23
billion in assets was thought to be preparing a bid for
the company. But a Smith & Williamson spokeswoman told
Institutional Investor that, as of Friday, the company is not
in discussions with Tilney.
As part of the companys preparation for a stock market
listing, Smith & Williamson said it will focus future
growth plans on serving private clients, with further
investment in new recruits, infrastructure, and corporate
[II Deep Dive: The Slippery Business of Manager
In a Rathbones statement to shareholders, the companys
chief executive Philip Howell said that despite extensive
due diligence and negotiations, the firm was unable to
reach a transaction that was in the best interests of
The potential combination was intended to accelerate
Rathbones existing strategy, but ultimately we were
unable to agree terms that offered our shareholders an
appropriate balance of risk and reward, he said.
Rathbones remains confident in its strategy and will
continue to look for growth opportunities in the sector and
assess them with discipline.
Work related to the potential merger has cost Rathbones
around £5 million in 2017, the company said, although
£1.8 million of this was accounted for as of the end of
June 2017 in an interim statement published by the firm.
Paul McGinnis, an analyst at Shore Capital, said the wording
of the statement implies that the talks stalled over price.
We applaud the discipline shown by Rathbones
management in being willing to walk away from a deal where they
felt it would be difficult to add value to shareholders,
McGinnis added that the financial consequence of a £5
million exceptional charge was reasonable as it
equates to 10 pence per share, which he believes is small
relative to any value destruction from overpaying on a
potential £600m deal.