Fund buyers think Assetco is a better home for River and Mercantile than Premier Miton due to a stronger potential overlap in strategies between the latter two, particularly UK funds.
River and Mercantile is in the middle of a bidding war between Premier Miton and Assetco after both asset groups confirmed in stock exchange announcements on 23 November 2021 they had approached the firm regarding an acquisition.
River and Mercantile confirmed it had received preliminary approaches from both groups, but added: “There can be no certainty that any offer will be made by either of Assetco or Premier Miton, nor as to the terms on which any such offer might be made.”
Assetco said its directors believe the firm and River and Mercantile are “highly complementary” and combining the two groups’ management teams would “create significant value for the combined group’s clients, portfolio managers, employees and shareholders”.
Premier Miton, meanwhile, said it believed “the scale and synergy benefits arising from a combination with River and Mercantile would drive value accretion for both sets of shareholders”.
Conditional on sale of solutions business
Both Assetco and Premier Miton have stated that any offer would be conditional on River and Mercantile completing the sale of its £42bn ($56bn, €49bn) solutions business which is due to be offloaded to Schroders in the first quarter of 2022.
Assetco already owns 5 million River and Mercantile shares representing approximately 5.85% of its voting rights of the company. Assetco chairman Martin Gilbert is also deputy chairman of River and Mercantile and, as such, has recused himself from the board for the purposes of discussions concerning the offer.
“It seemed obvious when Gilbert/Assetco took a stake in River and Mercantile an offer would be made at some point,” said Fairview Investing founder Ben Yearsley.
UK strategy overlap
Chelsea Financial Services managing director Darius McDermott said Premier Miton already has similar UK strategies to River and Mercantile .
Gervais Williams runs the Premier Miton UK Smaller Companies and UK Multi Cap Income funds, as well as the Miton UK Micro Cap Trust and the Diverse Income Trust.
These could overlap with the River and Mercantile UK Equity Income and UK Smaller Companies funds, run by Dan Hanbury, and the UK Recovery and UK Equity High Alpha strategies, managed by Hugh Sergeant.
“Obvious overlap is the area of smaller companies which [Premier Miton’s] Gervais Williams has… I’m not quite sure how that would fit,” McDermott said.
McDermott noted, however, that Assetco owns Saracen Fund Managers which also specialises in UK equities, with the UK Alpha and UK Income funds. But he said there is the chance that River and Mercantile retains autonomy if it is bought by Assetco, in which case it would benefit from centralised savings around compliance.
Unhappy managers will leave
McDermott added from a fund buyer’s perspective he would want to make sure that the River and Mercantile managers, including Hanbury and Sergeant, were happy with being acquired. “If they’re not happy, they won’t stay,” he said.
AJ Bell head of active strategies Ryan Hughes said River and Mercantile has been pushing in the UK for some time and Premier Miton has grown that capability as well.
If the two groups merged, Hughes said there would be six different funds in the UK All Companies sector with a Premier Miton/River and Mercantile badge, and there would be overlap in equity income and small cap.
“Absolutely you could see the potential for some tidying up of a UK range and some consolidation there,” he added.
But Hughes said, outside of UK strategies, it is not too bad a fit between Premier Miton and River and Mercantile.
Yearsley added from an investor’s point of view, Assetco would be the better home for River and Mercantile.
“Of the two, the Assetco deal is a better fit from an investor’s perspective as there is no real overlap,” he said. “I think Premier could get messier as both are strong on UK, income and small cap.”
Under takeover code rules, Assetco and Premier Miton have until 5pm on 21 December to either announce a firm intention to make an offer for River and Mercantile, or not, in which case they cannot make another bid for six months afterwards.
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