the Brewin’s dolphin (LSE:BRW) stock price was the biggest riser on the FTSE250 Thursday morning. The stock jumped more than 60% to around 510 pence per share following the Royal Bank of Canadato acquire the wealth manager.
On Thursday, Brewin Dolphin said it had agreed to a £1.6 billion takeover by RBC Wealth Management (Jersey) Holdings Limited, a subsidiary of Royal Bank of Canada. As part of the deal, shareholders will receive 515p per share. The takeover is still subject to shareholder approval and the receipt of regulatory support, but is expected to materialize.
If the deal goes through, the price shareholders will receive is a 62% premium to the company’s closing price of 318p on Wednesday. As a result, FTSE 250 stock surged massively on Thursday morning when news of the proposed deal broke.
At the time of writing, the share sits at 510p per share, which is just a 5p discount to the figure shareholders will receive if the deal goes through.
RBC said it is strategically focused on evaluating and acquiring growth opportunities in the wealth management industry. This is especially true in its main markets of Canada, the United States and Europe.
RBC executive Doug Guzman said that “The UK is a key growth market for RBC and Brewin Dolphin provides us with an exceptional platform to significantly transform our wealth management business in the region. » He added that Brewin was also a “market leader” in Canada and growing in the United States.
Why Brewin Dolphin?
Brewin Dolphin, founded in 1762, has become one of the UK’s largest wealth managers. It currently has some £55bn in assets, meaning RBC values the company at 2.8% of assets under management.
In recent months, geopolitical tensions, including Russia’s invasion of Ukraine, have hit Brewin’s stock price. On Wednesday night, the stock was trading at a 13% discount to the previous three months and was down 17% over the past six months.
The company said in late February that assets under management had fallen to £55bn due to market performance. As of December 31, assets under management were £59 billion, up 3.7% from the previous three months.
The wealth manager offered a relatively attractive dividend yield of 3%.
Will the case pass?
Brewin’s directors have already urged shareholders to accept the deal and with a 62% premium you can see why. “Building on the strong organic growth we have achieved to date, the combined business will create an attractive platform for future growth,” Brewin Dolphin general manager Robin Beer said on Thursday.
Personally, RBC’s proposal was good news for me. I sold my shares of Brewin Dolphin on Thursday morning at the inflated price, deciding not to wait for RBC’s offer to be accepted. I thought I could use the funds better now and elsewhere.