Tilney and Smith & Williamson strike revised merger deal with Warburg Pincus investing in the group
Wealth managers Tilney and Smith & Williamson have agreed a revised merger deal with private equity fund Warburg Pincus investing in the combined group.
The deal had looked in doubt after regulatory problems and the coronavirus crisis meant an initial deadline to agree a merger was missed.
Today, the pair said as part of the revised transaction funds advised by Warburg Pincus would co-invest in the business alongside Tilney-owner Permira.
The two said the revised transaction would result in a significant reduction in external debt for the combined group, lower ongoing financing costs and an improved regulatory capital position.
They said the new investment by Warburg Pincus “represents a significant vote of confidence in the strength of a combination of Tilney and Smith & Williamson and adds further credibility to the firm’s longer term strategy”.
As a result of the deal, AGF, Smith & Williamson’s largest shareholder, will fully exit its investment in the group.
Subject to regulatory and antitrust consent and the approval of Smith & Williamson’s shareholders, it is expected that completion will take place in the second half of 2020, the pair said.
The combined business will be responsible for approximately £44bn billion in assets under management and, on a pro forma basis, will generate circa £530m.
David Cobb and Kevin Stopps, co-chief executives of Smith & Williamson, said: “The rationale for merging Smith & Williamson with Tilney has been persuasive from the outset, given the complementary strengths of the two businesses and the benefits of scale the combination will bring. The revised structure retains both these strategic benefits, as well as value for our shareholders, and delivers a more robust financial structure and a strong additional partner for the future in Warburg Pincus.”
Chris Woodhouse, Chief Executive of Tilney, said: “This transformational deal brings together two highly complementary and successful businesses, with shared values of focusing on our clients and high standards of professionalism. Together, Tilney Smith & Williamson will be uniquely well placed to support clients with both their personal financial affairs and business interests.”
In April AGF warned that there were doubts that a revised deal could be reached.
“While all parties remain committed to the merger, given the covid-19 situation and the fact that the revised structure has not yet been agreed, there can be no certainty that the transaction will proceed,” it said.
Wealth manager Tilney – which is backed by private equity firm Permira – announced in September it had agreed to acquire wealth manager and accountancy firm Smith & Williamson in a £625m deal.
AGF said the two businesses had extended the original expiry date of the merger (16 April) to agree a new transaction structure intended to meet final regulatory approval.
The Financial Conduct Authority was reportedly concerned that the combined business would carry too much debt under the original transaction structure.
Kirkland & Ellis is acting as legal adviser to Warburg Pincus. and Macfarlanes is advising Smith & Williamson.