US private equity firm Warburg Pincus is injecting around £250m into the merger of Tilney and Smith & Williamson to help get the deal between the wealth managers over the line.
The transaction is now expected to complete in the second half of this year resulting in a combined group called Tilney Smith & Williamson which will employ around 280 investment managers, with 80% of its assets in discretionary mandates or funds. It is expected to manage £44bn in assets and generate around £530m of revenue.
The news comes after Citywire’s Wealth Manager
Filings by S&W’s largest backer, Canadian asset manager AGF, which is selling its holding, reveal the price of the deal may have fallen as the firm said it expected to get £176m for its 30% stake in S&W down from the £193m it stated earlier in the year.
As part of the revised transaction, Warburg Pincus funds will co-invest in the combined business alongside funds advised by Permira, the private equity group that currently owns Tilney, resulting in a significant reduction in external debt for the combined group.
The two firms have now confirmed a new proposal will be submitted to the FCA and the deal will then be subject to S&W shareholder approval.
In April AGF said new terms had been agreed, including a ‘material new equity investment’ that would reduce the debt attached to the deal.
Tilney refinanced its debt in mid-August last year, when it reportedly owed £405m, of which 79% was due to be paid within the following five years.
In a joint statement, S&W’s co-chief executives David Cobb and Kevin Stopps said the revised deal retained the strategic benefits of combining the groups and delivered ‘a more robust financial structure and a strong additional partner for the future in Warburg Pincus’.
After an abortive round of talks on a combination with both Tilney and Rathbones two years ago, S&W agreed the terms of a takeover with Tilney in September, creating a £45bn wealth management business with annual revenue of around £500m, valued at around £1.8bn.
Tilney Smith & Williamson will have 260 financial planners and a professional services business with around 150 partners and directors, across 36 offices throughout the UK, Ireland and the Channel Islands.
Warburg Pincus has also held discussions with Quilter over a possible bid, it was reported in January, although no further developments have been announced since.
