Quilter bid for Lighthouse vindicates AFH rebuff

Premium price tag is several times higher than bid rejected in 2016

Quilter

Quilter has bid a premium for UK advice firm Lighthouse in a move that “vindicates” in the Aim-listed firm’s decision to rebuff an offer from AFH three years ago.

Quilter advice arm Intrinsic has agreed to buy Lighthouse for £46.2m. The deal is expected to see over 400 Lighthouse advisers join growing Quilter’s and Intrinsic’s financial adviser count to more than 3,900.

Quilter will pay £42.2m for the deal, with the remaining £4m to be paid in excess cash held on Lighthouse’s balance sheet.

Gbi2 director Graham Bentley said the price agreed is “something of a premium” given the business’s market cap was about £30m. “It suggests Quilter expects to generate much higher profits in future – interesting given Lighthouse latest profits rose over 30% versus the previous year.”

The pricetag is significantly higher than the £17.4m offer Lighthouse rejected from AFH in 2016. Bentley said Quilter’s £30m higher offer “absolutely vindicated the rebuff to AFH”.

Staff retention essential

Lighthouse, which is an AIM listed company, provides advice to retail and corporate customers through three divisions: its national affinity business, its wealth advisory business and appointed representatives servicing customers in their local communities.

Bentley said it remains to be seen how the two businesses will fit together and its benefits. “We’ll need to see how staff retention evidences itself, and how Lighthouse advisers feel about working under the Intrinsic banner.”

“The access to six million members of the affinity groups where Lighthouse is the preferred provider is a clear benefit.”

Clive Waller said it was hard to say what the impact of the acquisition would be on Quilter. “Lighthouse doesn’t have a single identity. They have different bits and different brands – some independent, some restricted.”

Success for Quilter depended on its ability to retain customers and advisers, Waller said. “Do this well, then the price is good. Fail, and the price is high.”

Advice market consolidation

Quilter’s chief executive officer, Paul Feeney, commented: “As the advice market consolidates the strategic acquisition of Lighthouse will help secure Quilter’s position as the place to go for trusted financial advice in the UK.”

 Andy Thompson, Intrinsic CEO, said the two businesses were “highly compatible” with similar experiences and complementary structures. “The acquisition presents an opportunity to combine the expertise and capabilities of both businesses to accelerate our ability to provide customers with quality controlled financial advice.”

Richard Last, chairman of Lighthouse, said the business will benefit significantly from becoming part of Intrinsic and the wider Quilter group.

“Furthermore, the acquisition provides Lighthouse shareholders with the opportunity to realise their investment in full and in cash at an attractive premium to the levels at which the share price has traded in recent months,” he added.

The acquisition is expected to complete during the second quarter of 2019, subject to conditions and approvals.

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