The Rothschild family has proposed buying out the shares in Rothschild & Co it does not already own for €48 a share, a premium of 19% over the closing price on Friday, 3 February.
The family holding company Concordia already has a 38.9% stake in the Paris-listed vehicle, which operates wealth and asset management, merchant banking and financial advisory businesses. However, the holding company has 47.5% of the voting rights of the listed vehicle.
In a statement, Concordia said none of group’s businesses needed “access to capital from the public equity markets”. It also said each division was “better assessed on the basis of their long-term performance rather than short-term earnings”.
“This makes private ownership of the group more appropriate than a public listing,” concluded the family holding company.
Just under three years ago, at the start of the pandemic, the Rothschild family pledged to build its stake in the business, spending up to €45m to buy another 3.5% of the company. This was done after the shares had fallen by as much as 40% in 2020 to €14.64, their lowest level since 2012.
Since then, the shares have recovered significantly to stand at €40.25 last Friday. As well as Concordia, there are other Rothschild-related vehicles that give the family collectively a larger stake of 54.5% in the listed entity and just over two-thirds of the shareholder votes.
Concordia indicated it would also allow tendering shareholders to benefit from any dividends declared and not paid, including a €1.4 per share general one and an €8 per share exceptional one to be voted on at the company’s annual general meeting on May 25.
The exceptional dividend would only be paid if recommended by the supervisory board and in the event of Concordia filing its proposed buyout offer. If accepted, the €48 a share offer would “would be adjusted downwards by the amounts so distributed”.
Concordia, which is in advanced negotiations with investors and banks about financing the offer, also intends to ask for the implementation of a squeeze-out to buy out those who do not tender their shares. That would be anticipated at the end of the first half.
Rothschild & Co took note of the proposed transaction and said its supervisory board had formed an ad hoc committee advised by independent valuations advisory firm Finexsi, which will provide a fairness opinion on the proposals. The listed company reports full-year results on February 13.
In the third quarter, the firm’s financial advisory unit outperformed the major US investment banks, reporting an 18% rise in revenues from a year ago to €547m. The five US banks' advisory revenues fell 38% in the same period.
Rothschild said its global advisory revenues for the first nine months of this year were up 8% to a record level of €1.4bn, “reflecting continued very strong levels of completion activity across our whole business”.
The bulk of the revenues, €1.04bn, came from M&A advisory, with the remainder from financing advisory, which includes restructuring. Activity from capital markets advisory was lower, but that was partly replaced by heightened private capital revenues.
During the third quarter, Rothschild advised Porsche on its €9.4bn IPO and Meggitt on its £6.3bn takeover by Parker Hannifin. The company also advised Uniper on its nationalisation by the German government.
At the time, the firm said it expected “completion activity” to remain strong for the final quarter of the year but said new deals would be impacted by “macro-economic headwinds”. As a result, it expects “a weaker start to 2023”.
It is unlikely to have beaten the financial advisory revenues it made in the fourth quarter of 2021, which rose 74% year-on-year to a record €617.4m, in its last quarter of 2022. Most banks have reported a slowdown in investment banking fees.