Evolution makes a buy in face of bid

The group said its subsidiary Williams de Broë agreed a deal with BNP Paribas Wealth Management to buy its private investment management (PIM) arm.

Evolution did not disclose the full price it is paying for the former Fortis Private Investment Management business, but said the gross consideration was £5m plus the value of net assets.

Evolution last week revealed it had been approached about a possible takeover, with Investec later revealing itself as the interested party.

Reports claim Investec wants to buy the group’s wealth management arm, but is less interested in its loss-making Evolution Securities investment banking division.

Evolution Securities has an office in Leeds, headed by Joanne Lake, chairman of Financial Leeds.

Investec last year bought Leeds-based wealth manager Rensburg Sheppards for £412m. It subsequently renamed the business and sold its fund management arm to Franklin Templeton Global Investors for £45m.

The latest deal is part of Evolution’s plan to grow its funds under management to £10bn by the end of 2012. Acquiring the former Fortis business will grow Williams de Broë to £7.8bn.

Evolution chief executive Alex Snow said: “We are delighted to be able to announce the acquisition of PIM and in doing so demonstrating our continued ability to successfully execute and integrate value enhancing acquisitions into our flexible and scalable operating framework.

“The group continues to be extremely well capitalised with a strong and liquid balance sheet and no debt. The acquisition furthers our aim to grow AUM (assets under management) to £10bn in the medium term and we welcome the clients of PIM to Williams de Broë and its growing franchise.”

PIM had gross assets of £19.9m at the end of 2010, generating revenues of £14.1m but losing £8.8m.

Evolution said it expected Williams de Broë to achieve a quick integration of the business, generating “substantial efficiencies”.

Philip Howell, chief executive of Williams De Broë, said: “Over the past five years Williams de Broë has, and continues to be, one of the fastest growing private client investment managers in an intensively competitive sector.

“All at Williams de Broë look forward to welcoming the team from PIM to our London office and their existing clients onto our well developed and increasingly sophisticated operational platform.

“We will continue to provide a highly professional and bespoke investment management service.”

Last month Evolution Group reported pre-tax profits of £4.3m for the first six months of the year, with continued growth in Williams de Broë’s income, assets under management and profits.

Total income at the group dropped to £51.6m and Evolution maintained its 1p per share dividend.

Mr Snow said at the time: “Against the backdrop of vicious market conditions, these achievements, together with the group’s continued financial strength, ensure the group is well positioned to see through the inevitable ongoing turbulence, and also take advantage of further growth opportunities.”

Williams de Broë’s half-year profits grew to £4.4m from £3.6m as its assets under management increased from £5.1bn to £6bn.

By contrast, its investment banking and stockbroking arm slid to £1.4m first half losses from £1.3m profits a year earlier.

Total income from investment banking dived 21 per cent year-on-year to £24.4m and Evolution said an “inevitable process of capacity reduction” in the investment banking sector has started.

“The first half of the year in investment banking was extremely difficult,” said the company.

“Conditions remained uncertain, and volatility flared up with one crisis after another.

“The uncertain environment and lack of conviction reduced turnover and liquidity in all asset classes. Corporate activity also remained lacklustre, whilst the IPO (initial public offering) and secondary placement market has become erratic and at times dormant.”

Shares in Evolution edged up 0.5p to close at 81p last night.

The deal is subject to approval from the Financial Services Authority.

Price described as reasonable

Henry Biddle, analyst at Peel Hunt stockbrokers, said Evolution has bought BNP Paribas Private Investment Management for what appears to be at a “reasonable price”.

“Initial consideration is £5m plus the value of net assets on completion, which are not given in the statement but we assume to be modest given gross assets of £19.9m.

“Williams de Broë has historically been able to pick up distressed/loss-making portfolios at reasonable prices and successfully integrate them onto the platform and within the brand.”

Peel Hunt moved from a buy to a hold recommendation, after the company’s price increased following news of Investec’s takeover approach.