UK-based merchant banking group Close Brothers Group has agreed to divest its wealth management division Close Brothers Asset Management (CBAM) to funds managed by Oaktree Capital Management in a deal valued up to £200m.
According to the terms, the transaction includes an upfront cash consideration of about £146m payable by Oaktree to Close Brothers, along with a dividend of £26m to be paid by CBAM to Close Brothers on or before the deal’s completion.
Additionally, £28m of contingent deferred consideration will be provided as preference shares.
Upon the completion of the proposed deal, Close Brothers expects to receive around £172m, gross of transaction costs.
Led by Eddy Reynolds, CBAM offers personal financial advice and investment management services to private clients in the UK.
The vertically integrated UK wealth manager operates out of 15 offices with over 150 investment professionals and approximately 870 employees.
The business division’s solutions include full bespoke management, managed portfolios and funds, distributed both directly through in-house financial planners and investment managers and via third-party financial advisers.
Through the sale of CBAM, Close Brothers aims to secure a competitive valuation for the wealth management unit. This will also allow Close Brothers to strengthen its capital position and concentrate resources on its core lending business.
The transaction aligns with Close Brothers’ strategy to focus on its retained businesses, maintain capital strength, and explore revenue growth opportunities.
Besides, the deal represents a multiple of 27 times CBAM’s statutory operating profit after tax for the 2024 financial year. As of 31 July 2024, CBAM’s gross assets were valued at £192m, with a post-tax profit of £7.4m for the financial year.
Furthermore, Close Brothers estimates that the upfront proceeds from the transaction will increase its common equity tier 1 (CET1) capital ratio by around 100 basis points on a pro forma basis.
Close Brothers’ chairman Mike Biggs said: “The Board has unanimously approved the transaction and believes that the agreed sale represents competitive value for our shareholders, allowing us to simplify the group and focus on our core lending business.
“CBAM has delivered impressive growth over the past years and has developed into a strong franchise. Under the new ownership, it will benefit from additional resources to accelerate its growth trajectory.”
Under Oaktree’s ownership, CBAM is expected to accelerate its growth, with plans to provide the investment required to enhance profitability and expand its presence in the wealth management sector.
Oaktree Capital Management managing director Federico Alvarez-Demalde said: “In the coming months we will bring to bear our extensive operational experience in the sector to work closely with Close Brothers and ensure a successful separation and transition of the business.”
Subject to certain customary regulatory approvals, the transaction is anticipated to be completed in the early 2025 calendar year.
