Rathbones Group Plc agreed to buy the UK wealth management business of Investec in an all-share deal valued at £839 million ($1.05 billion).
Investec will be a minority shareholder in the enlarged Rathbones entity, with 41.25% stake and 29.9% voting rights, according to a statement Tuesday.
The combination will create a wealth manager with about £100 billion in funds under management and administration, the companies said.
The transaction is the latest sign of consolidation in the wealth management industry as rising cost of regulation, technology and operations push firms to merge.
Several consolidators have bought advice businesses and wealth boutiques to gain scale. Last year RBC Wealth Management agreed to purchase Brewin Dolphin Holdings Plc in a £1.6 billion all-cash deal to build a £64 billion firm.
The Rathbones-Investec combination “has been implemented through a capital efficient mechanism in a competitive and consolidated market where scale is more important than ever,” Investec Group Chief Executive Officer Fani Titi said on a media call Tuesday. “On the fundamentals, we are a strong fit.”
The merger will mean annual cost and income synergies of about £60 million, said Nishlan Andre Samujh, Investec’s finance director.
Investec shares climbed 3.3% as of 9:27 a.m. in London trading, while Rathbones rose 2.6%.
Under the terms of the agreement, Rathbones will issue new shares in exchange for 100% of Investec Wealth & Investment UK business and Rathbones.
The enlarged Rathbones Group will remain an independent company operating under the Rathbones brand out of the London office, with Investec as a long-term, strategic shareholder.
Investec will get to nominate two non-executive directors to the board of the new Rathbones entity, and Ciaran Whelan is one potential candidate, Titi said.
On possible job cuts as a result of the merger, Rathbones CEO Paul Stockton said there will be changes inevitably, but it’s too early to discuss details.