Rathbones in £2bn merger talks with rival

WEALTH manager Rathbones is eyeing up a £2bn tie-up with rival Smith & Williamson as the sector looks to protect itself from tighter regulation and increased competition by bulking up.

Rathbone Brothers, which was set up in 1742 as a timber trading business, announced it was in exclusive talks with the London-based group yesterday in a deal that could bring together 3,000 staff and more than £50bn in assets. The move comes a month after Canaccord Genuity agreed to acquire wealth manager Hargreave Hale, with more consolidation expected among Britain’s wealth managers as they battle against rising competition, increased pressure from the City watchdog and incoming regulation such as Mifid II.

While City brokers welcomed the potential deal between Rathbones and Smith & Williamson, Stuart Duncan, a Peel Hunt analyst, said excitement was likely to be tempered by challenges in completing a mega-merger, and shares in Rathbones were broadly flat on the news.

Andrew Watson, N+1 Singer analyst, said that while a deal would require “material cost synergies” to deliver shareholder value he didn’t expect the axe to fall on huge numbers of staff.

For Rathbones and Smith & Williamson, a merger is seen as a way to grow in this environment rather than to slash costs, one source said. As well as managing around £19bn of funds, Smith & Williamson is also one of Britain’s largest accounting firms, meaning a deal would hand Rathbones access to a new pool of advisers.

It is not clear who would run any new merged group. Smith & Williamson is run by David Cobb and Kevin Stopps, as co-chief executives, while Rathbones is led by Philip Howell.