The Brewin Dolphin (LSE:BRW) share price was the biggest riser on the FTSE 250 on Thursday morning. The stock shot up by more than 60% to around 510p per share following the Royal Bank of Canada‘s move to acquire the wealth manager.
RBC buyout
On Thursday, Brewin Dolphin said it had agreed to a £1.6bn takeover by RBC Wealth Management (Jersey) Holdings Limited, a subsidiary of the Royal Bank of Canada. Under the deal, shareholders will get 515p per share. The takeover is still subject to shareholder approval and receipt of regulatory backing, but is likely to go through.
If the deal is accepted, the price shareholders will receive is a 62% premium to the company’s closing price of 318p on Wednesday. As a result, the FTSE 250 share jumped massively on Thursday morning as news of the proposed deal broke.
As I write, the stock sits at 510p per share, which is only a 5p discount on the figure shareholders will receive if the deal goes through.
RBC has said that it is strategically focused on evaluating and acquiring growth opportunities in the wealth management sector. This is especially true in its core markets of Canada, the US, and Europe.
RBC executive Doug Guzman stated 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 is growing in the US.
Why Brewin Dolphin?
Brewin Dolphin, founded in 1762, has become one of the largest wealth managers in the UK. It currently has some £55bn in assets, meaning RBC values the company at 2.8% of the assets under management.
In recent months, geopolitical tensions, notably Russia’s invasion of Ukraine, have hit the Brewin share price. On Wednesday evening, the stock was trading at a 13% discount compared to three months previous and was 17% down over the last six months.
The company said at the end of February that assets under management declined to £55bn due to market performance. As of December 31, assets under management had stood at £59bn, representing 3.7% growth over the previous three months.
The wealth manager had been offering a relatively appealing 3% dividend yield.
Will the deal go through?
Brewin’s directors have already urged shareholders to accept the deal and at a 62% premium, you can see why. “Building on the strong organic growth that we have achieved to date, the combined business will create an attractive platform for future growth,” Brewin Dolphin chief executive Robin Beer said on Thursday.
Personally, the RBC proposal was good news for me. I sold my shares in Brewin Dolphin on Thursday morning at the inflated price, deciding not to wait for the RBC offer to go through. I thought I could better use the funds right now and in other places.