The £1.6billion bid for Brewin Dolphin by the Royal Bank of Canada is one of those rare occasions when the potential marriage between two firms looks like a snug fit, and brings a rather juicy dowry in tow.
RBC is paying a generous price for the privilege of access to the portfolios of some of the UK’s wealthiest families, offering investors 515p a share in cash, a handsome 62 per cent premium on the latest market price.
That’s not bad going and, as it is an all cash offer, provides investors with certainty. It’s also a relief to be greeting the foreign takeover of one of Britain’s oldest financial institutions with glad tidings rather than the scorn usually poured on opportunistic overseas predators.
With its £1.6bn bid for Brewin Dolphin, Royal Bank of Canada is paying a generous price for the privilege of access to the portfolios of some of the UK’s wealthiest families
While it is always nostalgic to see one of the City’s most familiar names being gobbled up by a foreign institution, it is fair to say that RBC is no foreigner to the UK.
The giant financial group – worth $200billion and listed in Toronto and New York – first opened its London office in 1910.
Over the last 100 years, RBC has grown across Europe and today employs around 5,500 people in the region.
That it chose to partner up with Brewin Dolphin is a vote of confidence in the strength of the wealth manager’s business.
The firm – which dates back to 1762 when a Cumbrian, John Dawes, set up as a stockbroker in London – has itself grown through takeovers and acquisition, merging with Brewin in 1974 to become Brewin Dolphin.
There have been some bumps since then, but overall the firm has gone from strength to strength on the back of buoyant stock markets and bumper fees.
RBC’s bid can also be taken as another stroke of confidence in the City post-Brexit, and why share prices in rivals such as Rathbones and Brooks Macdonald also shot up.
Earlier this week Lord Hill, the UK’s last EU commissioner and a committed Remainer, went as far as praising the City on how it has kept its huge lead in financial services as Europe’s biggest financial centre.
It did so, he added, by getting on with the job ‘quietly, quickly and efficiently’. Quite the compliment.
The latest EY Brexit Tracker also confirmed that the City exodus never happened.
The number of jobs lost is about 7,000 – way off the mad forecasts of a bloodbath. In fact, more than 5,400 jobs have been created as overseas firms beef up their London base.
Pointing this out is not to make some ‘despite-Brexit’ scorecard, but to confirm what most sensible observers knew at the time, which is that London always had the edge when it came to liquidity and depth.
Inevitably, there will be job losses as a result of the RBC-Brewin merger as they work out areas of overlap. Inevitably, some of the most senior people will leave and strike out on their own.
As the City’s rich history shows, that is how baby dolphins are spawned.
Boots has had a good pandemic. The UK’s 2,000-plus stores saw pharmacy and retail sales jump by 15 per cent in the second quarter.
Beauty products had an especially good run as women splashed out buying war paint again as they emerged from lockdown, and it is now the UK’s biggest beauty retailer. Online sales were up 60 per cent pre-Covid, and are now around 15 per cent of sales.
Boots has always suffered from low baskets – the amount spent each visit – but customers are now spending more.
Whether that keeps up when more normal times return – and the need for masks and hand sanitisers falls away – will be interesting to watch as will the trials of GP-style appointments at their pharmacies.
With the long waiting times for seeing GPs, this is surely a no-brainer. With any luck, they will have the sense to have GPs available at weekends, one of the great weaknesses of the NHS’s general practice.
The big question now is who will be the new owners of Boots? The relationship between Ornella Barra (partner of Stefano Pessina, boss of Walgreens Boots Alliance) and chief executive Seb James has been effective.
It will be disappointing if they don’t pick a new owner bold enough to continue bringing Boots into the modern age.
Shares in Sir Martin Sorrell’s S4 have fallen again following the surprise delay in publishing its accounts.
A former finance director himself, Sir Martin has so far not given any reason for why the auditors PwC have delayed signing-off. Investors may want to recall that WPP, his alma mater, was well versed in profit warnings.
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