Due to the impact of the COVID-19 pandemic and the ongoing discussions with the Financial Conduct Authority (FCA) regarding the transaction structure, the proposed merger between Tilney and Smith & Williamson will be delayed.
On 19 September 2019, Tilney and Smith & Williamson announced that they had reached agreement on the terms of a proposed merger of their businesses. The transaction would involve the acquisition of the entire issued and to be issued share capital of Smith & Williamson (the “Combination”) by Tilney Group Limited and other entities controlled by funds managed or advised by Permira and would be implemented by way of a Court-sanctioned scheme of arrangement under the Companies Act 2006. In November 2019, Smith & Williamson shareholders voted overwhelmingly in support of the Combination.
Revised Structure and COVID-19
In January 2020, the FCA indicated to Tilney and Permira that the original proposed transaction structure had not met with its approval. Over the subsequent months, the parties have worked together constructively on developing a revised transaction structure to accommodate the feedback from the FCA. Significant progress has been made in this respect. Under the revised structure, there would be a material new equity investment and thus a significant reduction in the external debt levels of the post-Combination combined group.
However, due to the unprecedented circumstances caused by the COVID-19 pandemic and the resultant challenges for regulators, investors and others, the parties’ discussions regarding the revised structure have inevitably been delayed. The primary focus of Smith & Williamson, Tilney and Permira at this time is the continued support of our respective clients’ needs, as well as the health and safety of our people, whose continued efforts to support their businesses and colleagues are a credit to them and to their organisations.
The Boards of Tilney and Smith & Williamson continue to believe that the Combination is strategically compelling and remain committed to the transaction. To this end, we have agreed to extend the original long-stop date for the Combination (which was 16 April 2020) for a further interim period to enable the parties to seek to agree the revised transaction structure. We expect to confirm whether agreement has been reached on the revised structure by the end of May 2020.
The revised transaction structure, if agreed, will require approval by the relevant regulators (including the FCA), antitrust authorities and Smith & Williamson shareholders at a second set of meetings. Allowing for the process of receiving these approvals in the current environment, if a revised structure is agreed, the Combination would be expected to complete in the second half of 2020. However, while all parties remain committed to the Combination, given the COVID-19 situation and the fact that the revised structure has not yet been agreed, there can be no certainty that the transaction will proceed.
Separately, and whether or not the Combination proceeds, following the interim distribution of 15 pence per share on 7 February 2020, the Smith & Williamson Board will update shareholders by the end of May 2020 on the timing and amount of any further distribution.
David Cobb and Kevin Stopps, Co-Chief Executives of Smith & Williamson, commented: “We continue to believe in the compelling strategic rationale of this merger and are pleased to report that significant progress has been made towards revisions to Tilney’s transaction structure that address the points raised by the FCA. However, in light of the extraordinary circumstances created by the COVID-19 pandemic, the transaction process has inevitably been delayed. If the parties can agree amendments to the transaction structure that the Smith & Williamson Board is able to recommend, we will ask our shareholders to vote on whether the revised transaction should go ahead.”
“We would like to thank all of our stakeholders for their continued support and efforts in these challenging times and will provide a further update as soon as possible. Smith & Williamson remains in a very strong position, despite the current crisis, with a robust balance sheet and an excellent, diversified client base, on which we have never been more focused. We have a clear strategic vision and will continue to look at ways to accelerate that where prudent and in the best interests of all our stakeholders.”
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.