RBC set to acquire British-based wealth manager Brewin Dolphin for $2.6-billion

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Royal Bank of Canada RY-T is acquiring British-based wealth manager Brewin Dolphin Holdings PLC for $2.6-billion, significantly expanding its presence in the United Kingdom where it will become a top-three wealth manager.

Headquartered in London and founded in 1762, Brewin Dolphin has £59-billion of assets under management, or about $97-billion, and about 80,000 clients and more than 30 offices across the U.K. and Ireland. The combined entity is expected to have about $104-billion in assets and $800-million in revenue, putting RBC’s strengths in private banking together with Brewin Dolphin’s broader asset management focus for a more full-service offering.

RBC is offering £5.15 a share, valuing Brewin Dolphin at £1.6-billion, in an all-cash deal to be funded from RBC’s considerable store of excess capital. The purchase price equals about 2.8 per cent of assets under management – a premium that is on the high side when compared with other U.K. wealth managers that have recently been sold, “but not out of the range,” Paul Holden, an analyst at CIBC World Markets Inc., said in a note to clients.

The acquisition is subject to approval by Brewin Dolphin’s shareholders and regulators.

Dave McKay, RBC’s chief executive officer, has said before that the bank was interested in deals that would extend the reach of its wealth management distribution in the United States or Europe. “Any time you get a chance to be a top three in a big market is really important,” he said in an interview.

But that won’t preclude RBC from continuing to look at further deals, including in the U.S. “It doesn’t change any of the opportunity ... in the United States,” he said.

RBC is flush with extra capital, with a common equity Tier 1 (CET1) ratio of 13.5 per cent as of the end of January – well above regulatory minimums. The ratio is a key measure of a bank’s capital reserves and resilience. The deal is expected to reduce that ratio by about 40 basis points (100 basis points equal one percentage point).

“Although a $2.6-billion deal sounds large, it is only about 18 per cent of [RBC’s] current excess capital position,” Gabriel Dechaine, an analyst at National Bank Financial Inc., said in a research note.

Doug Guzman, RBC’s head of wealth management, said in a news release that the acquisition “will increase the depth and breadth of our services and position the combined business as a premier integrated wealth management provider to private and institutional clients.”

Brewin Dolphin CEO Robin Beer said his company will “be able to provide our clients with a broader range of products and services, and expand our distribution channels” as part of RBC. Brewin Dolphin is expected to operate as a stand-alone subsidiary after closing.

The acquisition is expected to close by the end of the third quarter of this year.

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