Martin Gilbert’s investment firm AssetCo plc said on Tuesday it agreed an all-share deal worth £99.8 million to buy fund manager River & Mercantile Group (RMG).

RMG shareholders will own 41.6% of the combined group after the deal.

AssetCo said it “is currently intended” that RMG, together with AssetCo’s Edinburgh-based active equities asset manager Saracen Fund Managers, will form the foundation for AssetCo’s active equities business.

“RMG brings a well-respected equities team which has produced excellent long-term outcomes for clients investing in UK, European and global equities, with £4.2 billion of AuM, a highly regarded specialist infrastructure team, and a strong distribution platform in wholesale and institutional markets,” said AssetCo.

Among the conditions of the deal is completion of the separate sale of RMG’s Solutions business to Schroders and the return of £190 million by RMG to its shareholders via a capital return.

Under terms of the acquisition, holders of RMG shares will be entitled to receive 0.07392 new AssetCo shares in exchange for each RMG share.

“Based on the closing price of 1,550.0 pence per AssetCo share on 24 January 2022 … the acquisition values each RMG Share at 114.6 pence and RMG’s entire issued and to be issued ordinary share capital at approximately £98.8 million …” said AssetCo.

“… the acquisition and the return of capital, taken together, value each RMG share at 334.9 pence and RMG’s entire issued and to be issued ordinary share capital at approximately £289 million.”

RMG chairman Jonathan Dawson said: “The board believes that the offer from AssetCo not only represents good value to shareholders, but provides our clients and colleagues with a powerful investment platform led by a team with deep experience in the asset management industry.

“The board encourages our shareholders to support this transaction as the board will be doing in respect of their own holdings.

“Taking this transaction and the sale of Solutions to Schroders together, we will have delivered total value to shareholders of £289 million, or £3.35 per share — a significant premium to the group’s undisturbed share price last summer.

“This confirms the board’s view that the market was undervaluing RMG and validates the steps we have taken to realise value for our investors.”

AssetCo chairman Martin Gilbert said: “The asset and wealth management industry is contending with significant structural shifts, including technological advances, a reorientation of investing and evolving client needs.

“We are committed to building an agile asset and wealth manager that is fit for purpose in the 21st century.

“The acquisition of RMG is a core part of this strategy; it strengthens our active equity capability and importantly provides a foundation stone to building a private markets business given its infrastructure investment team.

“RMG complements our existing presence in thematic investing with Rize ETF and our investment in Parmenion, a digital platform for the financial planning sector.

“I’m looking forward to continuing to work with RMG team to develop the business, to ensure we continue to meet investors’ needs and to unlock value for RMG shareholders.”

Gilbert is also deputy chairman of River & Mercantile.

Gilbert said later that AssetCo had “nothing imminent” in the acquisition pipeline.

But he added: “We see a lot of potential transactions and we will see what comes up in the market. We are delighted with the quality of River & Mercantile as a business and are focused on improving the businesses we own.

“In terms of what next, we are looking at opportunities right across the spectrum, including in the wealth space, the focus would be on the faster growing areas of the wealth space …

“We are very keen on the active equity business, and we think the markets are going to move our way.

“I think we can help Saracen and River & Mercantile with distribution.

“The Saracen investment process sits neatly within the River & Mercantile capabilities. The key is to play to the strengths of the talented fund managers, but where we can make savings we will.”

AssetCo CEO Campbell Fleming said: “Economic headwinds and tightening of monetary policy offer the backdrop for active equity managers to prove their worth.

“RMG’s highly regarded equity team, alongside that of Saracen Fund Managers, allows us to create a platform to build a best-in-class active equities business.

“A key part of this will be to build on RMG’s strong ESG credentials ensuring we walk-the-walk rather than just talk-the-talk.

“RMG’s existing distribution channels combined with our global reach and connections gives us the opportunity of a strong pipeline of new business in the UK and in key regions across the globe.”

AssetCo deputy chairman Peter McKellar said: “Pensions funds, insurers and other institutional investors are increasing their allocations to non-public market assets, in part due to their search for yield.

“RMG’s proven infrastructure team will be a cornerstone to rolling out our private markets capabilities to meet investors’ requirements.

“The AssetCo team have been meeting with institutional investors around the world discussing their private market needs for more than three decades.

“I am delighted about working with the RMG infrastructure team to develop their business and our overall private markets franchise.”

Later on Tuesday, River and Mercantile Group plc announced the proposed sale of its US Solutions business, River and Mercantile LLC by River and Mercantile US Holdings Limited, a wholly owned subsidiary, to Agilis Holding Company LLC for a minimum consideration of $8.6 million. 

“Michael Faulkner, Ryan McGlothlin, Tom Cassara and David Rosenblum, the key senior managing personnel of the US Solutions business, hold the interests in the purchaser and are providing the funding to complete on the transaction,” said River and Mercantile.

“Michael Faulkner and Ryan McGlothlin are also directors of the seller and therefore the transaction constitutes a related party transaction under Chapter 11 of the Listing Rules and requires R&M shareholder approval …

“The transaction is also conditional on the transfer of the group’s emerging markets equities ‘ILC’ business out of the company.

“ILC will continue to be part of the group’s asset management activities and will be supported by R&M’s remaining business.

“The transaction is expected to complete in the second quarter of the year …

“Assets under advice and management total $7.4bn.”