After two false starts, Assetco has finally moved forward with its acquisition of River and Mercantile.
On Tuesday, it was confirmed that the businesses have reached an agreement for an all-share acquisition of the entire issued and to be issued ordinary share capital of River and Mercantile Group, excluding the stake already held by Assetco.
It will see Assetco pay £98.8m ($133.1m, €118m), with River and Mercantile (R&M) shareholders receiving 0.73 Assetco shares for every R&M share they hold.
R&M said the deal will deliver total value to shareholders of £288.8m, as they will also benefit from a return of capital of £190m from the proceeds of the sale of its Solutions business to Schroders, which was a precondition of the AssetCo acquisition.
At completion, which is expected in the second quarter of 2022, River and Mercantile shareholders will own just under 42% of the combined group.
Market undervalued River and Mercantile
Jonathan Dawson, chairman of River and Mercantile Group PLC, said: “The board believes that the offer from Assetco not only represents good value to shareholders, but provides our clients and colleagues with a powerful investment platform led by a team with deep experience in the asset management industry.
“The board encourages our shareholders to support this transaction as the board will be doing in respect of their own holdings.
“Taking this transaction and the sale of Solutions to Schroders together, we will have delivered total value to shareholders of £289m, or £3.35 per share – a significant premium to the group’s undisturbed share price last Summer.
“This confirms the board’s view that the market was undervaluing R&M and validates the steps we have taken to realise value for our investors.”
Job cuts on the cards?
Currently, the intention is to bring River and Mercantile together with Assetco’s existing active equities manager, Saracen, to form the foundation for Assetco’s active equities business.
It is also intended that R&M’s sustainable infrastructure investment strategy will form the first building block in the combined group’s private markets capabilities.
However, following completion and the sale of the US Solutions business, the agreement document outlines that “there will be a need to right size the RMG business for a significant reduction in scale”.
Assetco chairman Martin Gilbert also alluded to the prospects of a restructure: “The asset and wealth management industry is contending with significant structural shifts, including technological advances, a reorientation of investing and evolving client needs.
“We are committed to building an agile asset and wealth manager that is fit for purpose in the 21st century.
“The acquisition of RMG is a core part of this strategy; it strengthens our active equity capability and importantly provides a foundation stone to building a private markets business given its infrastructure investment team. RMG complements our existing presence in thematic investing with Rize ETF and our investment in Parmenion, a digital platform for the financial planning sector.
“I’m looking forward to continuing to work with RMG team to develop the business, to ensure we continue to meet investors’ needs and to unlock value for RMG Shareholders.”