Old Mutual plc Acquires Quilter Cheviot
Old Mutual plc ("Old Mutual" or the "Group") today announces that Old Mutual Wealth, its leading retail investment business in the UK and cross-border markets, will acquire Quilter Cheviot (the "Acquisition") for a consideration of up to £585 million.
The acquisition of Quilter Cheviot will add a strong discretionary investment management capability, accelerating Old Mutual Wealth's strategy to build a vertically integrated wealth management business with £92 billion* of funds under management ("FUM").
The Board of Old Mutual believes the Acquisition is highly complementary to Old Mutual Wealth's existing strategy and provides attractive strategic and financial benefits to the Group and its shareholders. The transaction is expected to meet the Group's ROE target range of 12 to 15% and generate annual Group synergies of £15 million by 2017.
The wealth management market is large and fast growing
- Forecast growth of 6-8% per annum in the highly fragmented discretionary investment management market is underpinned by long-term structural trends and regulatory changes
- The affluent segment represents c.28% of the UK population and c.55% (£1.7 trillion) of the UK wealth market; the high net worth ("HNW") segment includes c.1% of the UK population and 29% (£0.9 trillion) of the UK wealth market
Quilter Cheviot is a high quality business
- Leading UK-based discretionary investment manager well positioned to benefit from favourable industry dynamics
- Significant player with 38,000 clients and FUM of £16.2 billion at the end of September 2014
- Experienced and highly productive investment managers, many with long tenure
- Operating margins of 29% and attractive revenue margins of 85-90 bps
Highly complementary to the Old Mutual Wealth strategy
- Expands retail client base into attractive affluent / HNW segments
- Enhances the capability to manage clients' money directly via skilled investment managers
- Creates a broad-based vertically integrated wealth manager across the investment value chain
- Significant extension of investment management capabilities
Attractive opportunity to enhance value
- Delivers high-quality earnings in investment management to replace heritage insurance earnings, with 85% of earnings to be modern and capital light by 2017
- Annual operational cost and margin synergies of £9 million and further revenue synergies
Strengthens value proposition for clients
- Extends solution and investment service offerings for clients of both Old Mutual Wealth and Quilter Cheviot
- Benefits from well-capitalised FTSE 100 owner, supportive of long-term development of the business
* Pro forma FUM at 30 June 2014, excluding £4 billion FUM in Austria and Germany, which were sold on 1 October 2014
Julian Roberts, Group Chief Executive of Old Mutual plc, said:
"We have made considerable progress in the execution of our stated strategy this year as we increase the pace of change in the organisation. The acquisition of Quilter Cheviot delivers the final substantive part of our investment programme in the UK toward building a vertically integrated wealth management business of scale in the UK. Quilter Cheviot is a high quality franchise with excellent management, which delivers strong investment performance for its clients. The acquisition is funded from part of the proceeds of the recent disposals in Europe and the US IPO. We have a robust integration strategy for Quilter Cheviot. Our executive team is committed and accountable for delivering on synergy and ROE targets and creating value for shareholders. Quilter Cheviot is a good fit for our business. It complements and differentiates Old Mutual Wealth as the business develops into a highly valuable enterprise in the future in its own right."
Paul Feeney, CEO of Old Mutual Wealth, said:
"I'm delighted that we've been able to acquire a business of the quality of Quilter Cheviot. We said two years ago that we wanted to build the leading, vertically integrated wealth management business. Since that time we've transformed Old Mutual Global Investors into a leading asset management player; we've acquired Intrinsic, the UK's leading network of financial advisers; announced a deal with IFDS to outsource and renew our operating platforms; and innovated in our core investment solutions with new services such as WealthSelect. Quilter Cheviot fills a significant gap in our business, allowing us to serve better the affluent and HNW segments. We believe this acquisition confirms our position as one of the leading wealth management businesses in the UK, well placed to benefit from the current transformation in this market."
Martin Baines, CEO of Quilter Cheviot, said:
"This is an exciting development for our business, our clients and our intermediary partners as we become part of Old Mutual Wealth, where our services will be complementary to the existing offering. Old Mutual Wealth has a very strong distribution network through which we will be able to promote our discretionary investment management services and we will get greater access to the market leading asset management capability within Old Mutual Global Investors. The long term parentage and financial security that the acquisition provides will allow us to continue to do what we do best, manage clients' money on a bespoke discretionary basis, providing high levels of service to both clients and intermediaries without compromise."