2022

2022 Open
2022 Open

Proposed Sale of River and Mercantile LLC

25 January 2022

Introduction

River and Mercantile Group PLC (the "Group" or "R&M") announces the proposed sale of its US Solutions business, River and Mercantile LLC (the "Company") by River and Mercantile US Holdings Limited, a wholly owned subsidiary of the Group (the "Seller") to Agilis Holding Company LLC (the "Purchaser") for a minimum consideration of $8.6 million (the "Transaction"). The Transaction is a key step in the Group's strategy of realising value for shareholders and follows the announcement in October 2021 of the sale of its UK Solutions business to Schroders and the proposed all-share acquisition of RMG by AssetCo plc, the terms of which are disclosed in the Rule 2.7 announcement issued this afternoon, which has been unanimously recommended by RMG's Independent Directors.

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. 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. R&M expects to publish a circular shortly relating to the Transaction which will contain a notice of General Meeting at which the resolution to approve the Transaction will be put to shareholders.

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 (the "Closing Date").

Description of the business

  • The Company operates independently to the UK Solutions business and focuses on improving investment outcomes for a range of US-based investors, offering flexible solutions determined by client-specific needs across both actuarial and investments.
  • There are two key groups within the Company; the actuarial group, which specialises in pension actuarial and administrative services including annuity buyouts and plan terminations, and the investment group, which specialises in outsourced CIO services, investment consulting, derivatives management, and investment management.

Details of the transaction

  • The Membership Interest Purchase Agreement was entered into on 25 January 2022 (the "Purchase Agreement") between the Seller, the Purchaser, Michael Faulkner, Ryan McGlothlin and Tom Cassara and David Rosenblum.
  • Pursuant to the terms of the Purchase Agreement, the Seller has agreed to sell the entire issued share capital of the Company to the Purchaser.
  • The consideration will be a minimum of $8.6m which will be payable $0.9m in cash on the Closing Date, a further $1.7m in cash 60 days following the Closing Date and the issuance of a secured loan note to the Seller of $6.0m on the Closing Date (the "Note").
  • The Note will have a five year term, bearing an annual interest rate of 6% with the first year's interest rolled into the principal and paid thereafter on an annual basis in arrears.
  • The repayment of the Note is accelerated as to $3m if RMG returns between £100m and £200m to its shareholders as part of the capital return announced by the Group on 24 November 2021, and 100% of the outstanding balance upon a return of £200m or more by RMG to its shareholders or a change of control of the Group.
  • The Seller shall provide reasonable evidence that the Company has net tangible assets on the day of completion of not less than $2.0m and the cash proceeds shall be adjusted up or down if the net tangible assets are higher or lower on a dollar for dollar basis.
  • Additional consideration may be payable by the Purchaser to the Group if the Company is sold (the "Further Transaction") during a further period of thirty-six (36) months after the Closing Date if the Further Transaction meets certain consideration thresholds, and subject to a cap of $8.6 million. The additional consideration right falls away upon repayment of the Note and RMG does not expect a material increase in the proceeds as additional consideration.

Company Financial Information and Impact of the Transaction on R&M

The gross assets of the Company were $5.7m as at 31 December 2021 and it delivered a loss before tax for the year ended 30 June 2021 of $1.9m. Assets under advice and management total $7.4bn.

The impact of the Transaction will be to increase R&M's surplus cash resources. The Transaction will not impact the operations of R&M's remaining business.

Contact Information

River and Mercantile Group PLC
Jonathan Dawson (Chairman)
James Barham (CEO)
+44 (0) 20 3327 5100

Lazard (Joint Financial Adviser to RMG)
Nick Millar
Anthony Segal-Knowles
+44 (0) 20 7187 2000

Fenchurch Advisory Partners (Joint Financial Adviser to RMG)
Vincent Bounie
Philip Evans
+44 (0) 20 7382 2222

Jefferies International Limited (Corporate Broker to RMG)
Paul Nicholls
Sam Barnett
+44 (0) 20 7029 8211

Montfort Communications Limited (PR Adviser to RMG)
Gay Collins
Nick Bastin
+44 (0) 7798 626282
+44 (0) 7931 500066

Allen & Overy LLP is acting as legal adviser to RMG.

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