The proposed merger between advice group Tilney and financial services company Smith & Williamson has been postponed as the two firms continue to renegotiate the deal.
This comes a few weeks after reports said Tilney’s valuation had been hit hard by the fall in the dollar value of its assets under management, making a deal between the two difficult to conclude.
Agreement needed
Toronto Stock Exchange-listed asset manager AGF Management has a stake in Smith & Williamson and first mentioned the delay on 15 April.
The firm said in a statement to the TSE that the completion of the deal has been postponed due to the covid-19 pandemic and the ongoing discussions with the UK’s Financial Conduct Authority (FCA) regarding the structure of the deal.
The long-stop date for the proposed merger was 16 April, but now both firms aer expected to confirm whether agreement on the revised structure has been reached by the end of May.
A revised transaction structure will require approval by the relevant regulators, competition authorities and a second set of votes by Smith & Williamson’s shareholders.
On that basis, the deal would be expected to complete in the second half of 2020.
Regulatory issues
In January 2020, as part of the regulatory process to approve the deal, the FCA raised a number of issues with the proposed transaction as it was originally structured.
Tilney and Smith & Williamson said that “significant progress” has been made in recent months towards a revised transaction structure to accommodate issues raised by the UK watchdog, including a “material new equity investment and a reduction in external debt for the combined group post-completion”.
Chris Woodhouse, chief executive of Tilney, said: “Both Tilney and Smith & Williamson continue to believe in the compelling strategic rationale for combining our businesses and remain committed to the transaction.
“In recent weeks, all parties have rightly been focused on addressing the challenges arising from the covid-19 pandemic, supporting our clients and moving to a remote working model.
“These unprecedented circumstances have inevitably led to a delay in the transaction process.”
Belief
David Cobb and Kevin Stopps, co-chief executives of Smith & Williamson, echoed the comments made by Woodhouse about their commitment to the deal.
“However, in light of the extraordinary circumstances created by the covid-19 pandemic, the transaction process has inevitably been delayed.
“If the parties can agree amendments to the transaction structure that the Smith & Williamson board is able to recommend, we will ask our shareholders to vote on whether the revised transaction should go ahead.”
Terms of the deal
In September 2019, the firms said that Smith & Williamson shareholders will receive £625m ($749m, €683m) through a combination of cash and shares in the merged business.
The shareholders will be placing the majority of their investment into the equity of the enlarged group.
The transaction values the combined business at approximately £1.8bn.
Tilney Smith & Williamson will have revenue of around £500m and earnings before tax of £150m.
