IFG Group is set to be acquired by a private equity firm in a deal that values the parent company of platform and SIPP operator James Hay and wealth manager Saunderson House at approximately £206m.
The board of IFG has unanimously recommended the group's shareholders accept the cash offer from UK private equity business Epiris - formerly known as Electra Partners - for £1.93 per ordinary share.
That represents a premium of some 46% on IFG's closing share price of £1.325 on 22 March 2019 and a multiple of approximately 21.4x IFG's adjusted after-tax earnings for the year ended 31 December 2018.
According to IFG, it is intended the acquisition will be implemented by means of a High Court-sanctioned scheme of arrangement under Chapter 1 of Part 9 of the Companies Act 2019. The deal is also conditional on, among other things, agreement by IFG shareholders and regulatory approvals.
Epiris has obtained commitments to vote in favour of the deal from all the board members of IFG and also an irrevocable undertaking to do so from Crownway Capital, a company owned and controlled by John Gallagher and his connected persons, in respect of ordinary shares representing some 9.65% of IFG's issued share capital. Gallagher stepped down as chairman of IFG in April 2018.
Describing the deal as "an excellent outcome for shareholders, for the company and for our clients", IFG CEO Kathryn Purves said. "The offer by Epiris represents a compelling opportunity for shareholders to realise an immediate and attractive cash value for their shareholding in IFG today. In addition, our employees and clients will benefit under the ownership of Epiris, which should help accelerate the delivery of IFG's strategic objectives and the underlying strategies of James Hay and Saunderson House."
Epiris partner Owen Wilson added: "We are delighted the board of IFG has recommended our offer and we are excited to work with management to realise the growth potential of James Hay and Saunderson House and to further enhance their position in their respective markets. Both have strong reputations across their broad range of clients."
Last year saw Saunderson House required to manage through a sale process that was subsequently cancelled, creating what Purves - in part of the group's preliminary 2018 results published this morning (25 March) entitled ‘Developing two self-reliant businesses" - described as "a degree of disruption for both clients and employees".
She added: "Following a comprehensive review of its strategy, Saunderson House expects to see its discretionary proposition continue to grow, enabling the business to attract younger clients at the wealth accumulation stage of their life. This strategy is expected to continue to enhance and embed long-term value in the business with clients accumulating wealth with Saunderson House and remaining clients for a significant period of time."
James Hay meanwhile saw a material increase in revenue in 2018, which Purves said was driven by pricing changes in 2017 and an increase in margin on cash as interest rates have increased. It was, however, adversely affected by weaker investment markets and a decline in defined benefit transfer volumes, which reduced new business volumes compared to the previous year.
"Following a comprehensive review of James Hay's strategy, we remain confident of its ability to develop from its current position as a trusted SIPP expert to address the wider platform market, supporting clients through their investment life cycle," Purves continued.
"James Hay plans to accelerate its expansion into the GIA and ISA market, significantly increasing its addressable market and leveraging its strong brand name and reputation with financial advisers to capture a greater share of client investment flows. Management continues to focus on driving new business into its MiPlan product, improving cost efficiencies, expanding its product offering and building out its investment platform."
On the year as a whole, she added: "The start of 2018 was a difficult period for the group, with assessments from HMRC in relation to Elysian Fuels and the cancelled Saunderson House sale process creating material disruption and distraction, both internally and externally. Management changes in April 2018 saw the appointment of a new chairman, CEO and CFO."
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