James Hay buys Nucleus Financial in £145m deal

Nucleus CEO David Ferguson

Pensions and investment firm James Hay said on Tuesday it agreed to buy Edinburgh funds platform Nucleus Financial Group in an all cash deal that values Nucleus at £144.62 million.

The price offered by James Hay of 188p per Nucleus share represents a premium of 41.89% to the closing price of 132.5p on December 1, 2020, the last business day prior to the commencement of the offer period and 12.24% to the closing price of 167.5p on February 8, 2021.

Nucleus share rose as much as 12% to around 187.5p on the news, almost touching the offer price.

Nucleus Financial’s major shareholder, Sanlam UK Limited, with 52.19% of shares, has given an irrevocable undertaking to vote in favour of the acquisition.

Sanlam UK Limited is an indirectly held subsidiary of Sanlam of South Africa. Should the acquisition complete, Sanlam UK Limited will receive £75 million in cash.

James Hay Holdings has received legally binding irrevocable undertakings in favour of the deal in respect of 55.88% of Nucleus shares.

The acquisition is subject to regulatory approvals and is expected to complete in the second quarter of 2021.

The combination of the two firms mays lead to a “moderate reduction” in headcount where there is duplication or where “operational efficiencies” might be achieved.

The James Hay Group is indirectly owned by private equity firm the Epiris Funds together with members of the James Hay Group management.

Nucleus CEO David Ferguson said: “Since we launched in 2006 we’ve always put the customer centre stage and while that has made us a little bit different it’s carried us to £17.4 billion in AUA and to a point where the sentiment of our users and our people has never been better.

“Becoming part of this enlarged group gives us a key role in a much bigger story where we can create a leading independent platform of scale with a high tech, high touch proposition and philosophy.

“I think the combination of our people’s talents and the size of the opportunity can see us carefully navigate the roadmap to deliver on this collective medium-term goal.

“I look forward to getting to know our new colleagues and moulding a group culture that is centred on doing the right thing and building a market-defining product that really delivers for advisers and their clients.”

James Hay Group CEO Richard Rowney said: “We are excited to be announcing the acquisition of Nucleus, which on completion will create a leading, independent, adviser platform, with c£45 billion of AUA.

“The two businesses have complementary areas of expertise and common beliefs about the importance of independence and only serving the adviser market.

“We admire much about Nucleus and the skills within its team, and look forward to working with them to better serve the growing needs of advisers.

“By joining forces, we can combine Nucleus’ reputation for great digital user-experience and James Hay’s pension specialism, creating greater strength and a platform with the scale to invest and deliver real value for advisers and their clients.”

Nucleus chairman Angus Samuels said: “The board of Nucleus is pleased to recommend James Hay Holdings’ cash offer for the company.

“The offer reflects the quality of the business and represents an opportunity for shareholders to exit their holding in cash at a significant premium to the pre-offer share price.

“Going forward, the board believes that in joining with James Hay, Nucleus will be part of a combined group that will have the scale and resources to support its continued growth against the backdrop of a highly competitive marketplace.

“The Nucleus board therefore unanimously recommends that shareholders vote in favour of the resolutions relating to the acquisition.”

Bill Priestley, Chief Investment Partner of Epiris, said: “The combination of the James Hay and Nucleus businesses is a compelling opportunity to create one of the largest adviser platforms in the UK wealth management sector.

“We are delighted to be supporting James Hay on this acquisition, a transaction which not only is transformational for the business, but also will deliver significant benefits to both James Hay’s and Nucleus’ advisers and clients.

“Following the acquisition, we believe the combined group will be well positioned to take advantage of further growth opportunities as the market continues to evolve.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.