The Edinburgh-based business had assets under administration of £4.3bn as at 28 September 2014 and should provide Alliance Trust with access to up to 48,000 new customers and as much as £4.6bn in new AUA, which would bring the combined group’s assets under administration to £11.5bn.
According to Alliance Trust, the acquisition of the business (which had income of £9.6m and generated £1.3m in pre-tax profit for the year ended 28th September 2014) is expected to shift its “current break-even profitability into meaningful profit in 2016, prior to integration costs.
In addition to the expected cost and revenue synergies, Alliance Trust said the deal opens up a strategic partnership channel that should allow it to expand its distribution capability.
The new channel consists of four areas, Alliance Trust said: “Pension providers: telephone and online share dealing services to their underlying SIPP clients, Building societies: offering both a telephone and online share-dealing service to their customers, Company share schemes: primarily share-dealing and custody services for companies offering share dealing to employees and Corporate ISAs: an ISA share-dealing service for employees of both US and UK companies,” the firm said.
ATS managing director, Patrick Mill, said the deal demonstrates the firm’s commitment to its ambitious growth strategy “by extending our impact and adding value for the long term, with immediate effect.”
Standardise the business
The deal is also expected to be positive for Brewins. According to the wealth manager, once all the related costs have been accounted for, the transaction it expects the sale to produce a net gain of around £1m that will be used for general corporate purposes. And, the firm said, the additional operation efficiencies resulting from the sale, are “anticipated to largely offset Stocktrade’s contribution”.
Numis analyst, Jonathan Goslin said the divestment is a good move for the group as it “will help further standardise the business and allow it to focus on discretionary wealth management.”
But, he pointed out, the firm still has around £4bn of execution only assets “which should help limit the impact on the rest of the Group.”
According to Liberum’s Justin Bates, Liberum has been a buyer of Brewin, based on its corporate improvement plan, and the Stocktrade deal is further evidence that this is leading to enhanced quality of earnings and consequently increased efficiency and profitability.
“We believe this transaction makes sense and will improve investors’ perception of the business. In turn, that will help support the re-rating the stock has experienced,” he said.
