31st Mar 2022 09:53
(Alliance News) - Royal Bank of Canada's GBP1.6 billion takeover offer for Brewin Dolphin Holdings PLC is "attractive" and unlikely to face competition, analysts said on Thursday.
RBC will fork out 515 pence per Brewin Dolphin share, a 62% premium to its 318p closing price on Wednesday. The offer values the London-based investment advice company's equity at GBP1.6 billion. RBC said this represents 2.8% of Brewin Dolphin's GBP55.0 billion in assets under management as of February 28.
Analysts at Berenberg said the offer is "attractive" and it is likely it receives approval from Brewin Dolphin shareholders. The offer needs the backing of 75% of Brewin Dolphin shareholders.
"Given the price, we think there is a high possibility of approval," Berenberg said.
Brewin Dolphin shares surged 61% to 512.10p each in London on Thursday morning, giving it a market capitalisation of GBP1.56 billion.
Prior to Thursday, the company's highest-ever share price was 412p, achieved in September of last year. The RBC offer represents a 20% premium to this.
RBC will combine its UK and Channel Islands wealth management arm with the FTSE 250 constituent.
RBC's rationale is clear, Berenberg said. It gives it a chance to expand in the UK.
The deal will create a "market leader" with GBP64 billion assets under management, on a pro-forma basis, as well as combined annual revenue of GBP545 million.
Berenberg added: "Following the acquisition, RBC Wealth Management will have a top position in the UK and North America, with approximately a 7% market share of the GBP1 trillion UK wealth market."
"RBC is looking to build out its UK and Irish wealth management businesses quickly and Brewin Dolphin is well placed to do this for RBC. The price does look slightly expensive on a price–earnings ratio basis, but RBC is confident that it can extract synergies from the combination."
RBC has earmarked CAD500 million, about GBP304.1 million in cost synergies, something which makes the chunky price tag more "palatable", Berenberg says.
At GBP1.6 billion, analysts at Peel Hunt said it is unlikely to "see other bidders emerging. It does highlight the value in the sector".
The broker noted the deal also puts a spotlight on others in the wealth management sector, including Rathbones Group PLC and Brooks Macdonald Group PLC.
Rathbones shares were up 11% at 1,954.00p. Brooks Macdonald was 5.9% higher at 2,595.00p.
By Eric Cunha; [email protected]
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