British company Schroders has entered into an agreement to acquire wealth management and mutual fund firm Cazenove Capital Holdings in a cash deal worth approximately £424m ($643m).
The acquisition will strengthen Schroders’ footprint in private banking business as well as in the UK intermediary business.
Based on the terms of the acquisition, Cazenove Capital shareholders will be entitled to receive 135 pence in cash for each ordinary share.
Schroders will recognize £395m as the acquisition cost and £29m as the effective future cost of existing deferred share compensation arrangements for Cazenove Capital Group employees.
Schroders chief executive Michael Dobson said, "This transaction creates a leading, independent Private Banking and Wealth Management business in the UK, and brings additional investment talent in complementary strategies across UK and European equities, multi-manager and fixed income to Asset Management."
Cazenove Capital chairman David Mayhew said that the acquisition will provide an improved proposition for its private wealth management and charities clients, as well as a strong strategic fit for its investment funds business and attractive financial terms for its shareholders.
After completion of the acquisition, Cazenove Capital will retain its brand name for its private banking business and Andrew Ross will manage the UK private banking operations, and report to Schroders Group head of private banking Philip Mallinckrodt.
The new start up will offer private banking and charities business services in the UK, while covering investment management, financial planning, deposit-taking and lending services.
As of 31 December 2012, the integrated pro-forma assets under management in private banking and wealth management were £28.4bn.
UK Intermediary adds £5.1bn of assets under management in Cazenove Capital’s investment funds business, which includes specialist investment management, to Schroders’ Intermediary business.
Cazenove Capital portfolio managers in UK and European for equities, fixed income, multi-manager and absolute return strategies will join Schroders’ existing investment team, according to the terms of the deal.
Schroders expects the deal will provide economies of scale, principally in UK funds distribution and infrastructure, which will enable it to achieve pre-tax cost synergies of between £12m and £15m per annum.
In December 2012, Schroders announced that it will purchase STW Fixed Income Management, which would bring its US fixed-income assets under management to $35bn.