An acquisition agreement to that effect was approved by the boards of RBC Wealth Management (Jersey) Holdings Limited – a wholly owned subsidiary of RBC – and Brewin Dolphin Holdings PLC.
Cash Offer With Takeover Premium of 62%
As set out in the acquisition agreement, RBC will offer Brewin Dolphin shareholders 5.15 British pounds (GBP) per share in cash. This values RBC Brewin Dolphin, which has issued approximately 303.7 million shares, at approximately GBP 1.6 billion.
The RBC offer includes a takeover premium of a whopping 62% relative to Brewin Dolphin’s share price on March 30, 2022, the day before the takeover announcement.
Taking the volume-weighted average price of Brewin Dolphin shares over the last 6 months prior to 03/30/2022 as the basis for calculation, the takeover premium is still a very healthy 54%. If you have shares of the long-established British asset manager in your portfolio, you can look forward to a hefty gain.
A Brief Portrait of the Companies Involved
RBC was founded in 1864 and is one of the world’s 15 leading financial services providers. The company is on the Toronto and New York stock exchanges. It has a market value or market capitalization of about 198 billion Canadian dollars.
RBC employs more than 88,000 people serving 17 million customers in Canada, the U.S. and 27 other countries. For the fiscal year ended Oct. 31, 2021, RBC reported total revenues of about CAD 49.7 billion and net income of about CAD 16 billion.
Through its subsidiary RBC WM (WM stands for Wealth Management), RBC also operates one of the world’s leading wealth management firms. In the UK and the Channel Islands, RBC WM is represented by RBC WMI. WMI here stands for Wealth Management International. This UK asset management subsidiary of RBC alone manages assets of GBP 44 billion.
Brewin Dolphin already has a checkered 260-year history and has been on the London Stock Exchange (LSE) since 1994. It manages total assets of GBP 59 billion for individuals, charities and companies.
Brewin Dolphin’s services include discretionary wealth management, retirement planning and tax-efficient investments. In 2021, the company had revenues of GBP 405.9 million and net income of GBP 55.3 million. Brewin Dolphin’s approximately 2,200 employees work in more than 30 offices in the United Kingdom and the Republic of Ireland.
How the Stock Markets are Reacting
Last Thursday, it was announced that the Royal Bank of Canada acquires Brewin Dolphin. Since then, Brewin Dolphin share price shot through the roof. It rose by a whopping 61% to stand at GBP 5.12 at the close of trading on the LSE, just short of the offer. So there’s a lot to suggest that investors are assuming the deal will go through without a hitch.
The price of RBC shares also gained on the Toronto Stock Exchange. It rose on Thursday by 1.7% to 23.09 CAD. Consequently, investors also welcomed the expansion of RBC’s activities in Europe.
RBC to Further Expand its Position in Europe
Ever-increasing cost pressures in regulatory measures, new technologies and in the day-to-day operations of asset management firms have led to numerous acquisitions and mergers in the industry in recent years. This cost pressure is certainly one reason for Royal Bank of Canada to acquire Brewin Dolphin.
In addition, RBC wants to further expand its position in Europe. Doug Guzman, head of RBC Wealth Management, also emphasizes this in his statement on the acquisition:
“The UK is a key growth market for RBC and Brewin Dolphin provides us with an exceptional platform to significantly transform our wealth management business in the region. It will make RBC Wealth Management the No. 3 player in the U.K. and Irish markets.”
What’s Next After Royal Bank of Canada Acquires Brewin Dolphin
The directors of Brewin Dolphin, who themselves own 0.2% of Brewin Dolphin’s issued shares, intend to recommend the takeover offer to their shareholders. If enough shareholders approve the takeover offer, the relevant regulatory authorities must then give the transaction the green light. If that is the case, RBC expects the deal to close in the third quarter of 2022.