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Quilter takeover: NatWest bid for QLT latest news and offer stock price

10:22, 16 August 2022

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Could NatWest make an offer on Quilter as it seeks to increase wealth management arm? Image: Shutterstock

The Quilter PLC (QLT) share price jumped 15% in one day at the end of last month after markets began speculating that UK bank NatWest might be in talks to take over the wealth management firm. 

Quilter (QLT), formally part of South Africa-based financial services firm Old Mutual, rebranded and launched an initial public offering on the London Stock Exchange in 2018.

Last week, the company admitted it was dealing with "revenue headwinds" as it reported first-half results, saying net advice fee revenue fell by £1m, mainly due to a £300m rise in outflows.

Nevertheless, pre-tax profit climbed to £182m, following a £21m loss in the same period a year ago, thanks to lower costs and a policyholder tax credt of £145m - compared with a tax charge of £48m in the first half of 2021.

Quilter (QLT) Price Chart

 

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Is Quilter in trouble?

The company's premium service Quilter Private Client mainly deals with high net worth clients, but lacks the scale to compete with larger investment banks. 

Analyst Jonathan Richards at Berenberg said in a note last month that assets under management (AUM) had "come under pressure as markets have declined during the second quarter". Indeed, the results showed that to the end of June AUM fell by 12% this year from £11.8bn at the end of December to £98.7bn.

Year to date, the shares are down around 20%, despite the recent jump on speculation of bid interest from NatWest.

Is it a viable takeover target?

Rising inflation rates have hit asset management firms this year as cautious investors reduce their exposure to risk. Rivals share prices have also fallen, with Abrdn (Aberdeen Asset Management) down 27% year-to-date, and Hargreaves Lansdown off 28%. 

If the shares look cheap to investors, then they're likely to appear cheap to potential suitors. NatWest, partly owned by the taxpayer, indicated recently it holds significant excess capital to be able to consider a merger.

Meanwhile, FTAdvisor reported recently that Quilter - with a market cap of around £1.55bn at today's share price - had also seen some interest from private equity firms Bain Capital, BC Partners and CVC.

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If NatWest does take over Quilter, it stands to benefit from the clientele that Quilter (QLT) will add to its portfolio.

Quilter history

Quilter (QLT) has had a turbulent existence since its 2018 IPO. In November 2021, Quilter sold its international division to Isle of Man based Utmost Group for a deal worth £483 million.

Just after this deal was announced at the beginning of 2021, the company announced it will be making up to 400 staff redundant in order to cut costs. Following which it introduced a redundancy support programme

Apart from a dip in 2020, Quilter's revenue has remained broadly steady, however, its net income has suffered since 2019. Since its IPO in 2018, its cash flow has only turned positive in 2021.

Due to the macroeconomic shocks seen in 2020, Quilter reported a fall in assets under management in 2021, its share price lowered in this period.

 

NatWest has the spare cash

NatWest is beefing up its asset management business. Last month chief executive Alison Rose said the bank had "significant excess capital" to seek aquisitions that would increase shareholder value.

According to its most recent earnings report, NatWest holds £198 billion in liquid assets and has enough excess capital to declare £1.75 billion special dividends.

In an interview with Goldman Sachs last month, Rose added “I’ve also said we would look at M&A if it’s going to drive compelling shareholder value and our business continues to generate capital.”

NatWest was also in talks to takeover Evelyn Partners, the outcome of which is yet to be seen.

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