RBC makes £963m offer for Bluebay

BLUEBAY Asset Management has accepted a takeover offer from Royal Bank of Canada (RBC), it said yesterday, in a deal which values the fixed income investment firm at £963m ($1.5bn).

Bluebay shareholders, if they agree to the deal, will receive 485p per share representing a premium of 29.1 per cent on the fund manager’s closing price of 375.70p on 15 October and a 57.7 per cent rise on the average closing price of Bluebay shares of 307.63p for the previous three months.

Investors that register for Bluebay shares by 5 November will also receive the proposed dividend of 7.5p per share for the financial year ending 30 June 2010 meaning the total price per share would be 492.5p.

Bluebay’s share price shot up nearly 30 per cent, or 111.6p per share, on the announcement to 487.30p per share.

The fund manager’s directors, who collectively own 20.5 per cent of the company, have given RBC irrevocable undertakings to vote in favour of the deal. Assuming the other shareholders accept the offer at the company’s annual general meeting on 23 November, RBC should take ownership of the fund manager in early December.

George Lewis, group head of RBC wealth management, said: “This acquisition will further RBC's strategy to leverage our position as a top 10 global wealth manager, and continue to expand our asset management solutions for the benefit of our clients around the world. Bluebay is an ideal fit with RBC’s growing asset management business.”

Separately, Bluebay reported pre-tax profit increased some 118 per cent to £50m on assets under management (AUM) which increased 41 per cent to $34.3bn for the year ending 30 June.

It also reported a 17 per cent – or $5.7bn – increase in AUM to $40bn for the three-month period to the end of September.

JEREMY SILLEM
CO-FOUNDER
SPENCER HOUSE PARTNERS

Spencer House Partners (SHP) has acted as Bluebay’s financial adviser for over four years. During this time it advised Bluebay on strategic direction including the decision to list on the London stock exchange in 2006. It has also advised on talks with Royal Bank of Canada. SHP was established in 2006 by Lord Rothschild and Jeremy Sillem to provide banking services to companies in the financial services industry, with a particular focus on asset management businesses. The firm offers strategic advice and will often take equity stakes in companies. Prior to establishing SHP, Sillem was the chairman of Bear Stearns International from May 2000 until January 2004. Before joining Bear Stearns, he spent a 28-year career with investment bank Lazard. In 2007 SHP advised a consortium including Crestview Partners, RIT Capital Partners and interests of Lord Rothschild, on the acquisition of a 24.9 per cent interest in fund manager Martin Currie with Sillem appointed to the board as a non-executive director. A year earlier SHP acquired a minority stake in investment advisers Partners Capital. It still plays an active role assisting the management with the strategic development of the company. Sillem is a member of the advisory board of Partners Capital.

BLUEBAY’S FOUNDERS SET FOR
BUMPER PAYDAY FROM DEAL
WITH ROYAL BANK OF CANADA

THE founders of BlueBay Asset Management stand to make £81m each from their remaining 8.5 per cent stakes in the business if the sale of the fund manager goes through as expected.

Chief executive Hugh Willis, and chief investment officer Mark Poole are already very wealthy men featuring in the Sunday Times Rich List regularly.

Prior to founding Bluebay Willis, 51,

spent eight years at JP Morgan, where he was co-head of its European credit arbitrage group. He also held senior positions within the global credit arbitrage group of Kleinwort Benson and the fixed income management groups of both Banca della Svizzera and Daiwa Securities Trust and Banking.

Poole, 49, spent several years at Credit Suisse First Boston and JP Morgan. He also held senior positions within the global credit arbitrage group of Kleinwort Benson.

Willis and Poole cut their stakes in Bluebay in February this year when they each raised £21m by selling 6.5m shares at 325p, although the firm said the proceeds of that sale have been ploughed back into the company through new fund launches.

Today's cash takeover bid at 485p a share, is at a 29 per cent premium on Friday's closing price and a 49 per cent premium on the founders' previous share placing in February. The two directors will be obliged to reinvest a quarter of the money they receive as part of the RBC deal - after tax - back into Bluebay's funds. Following the deal, if either man leaves the company within three years, 40 per cent of the money they have invested under the agreement will be "subject to forfeiture". Both men have also agreed to increase the proportion of their future pay that will be deferred in bonuses from 40 per cent to 60 per cent.

Other investors likely to do well from the sale include Aegon Asset Management, which owns over 4 per cent of Bluebay and stands to make around £39m from the sale, and Ignis Investment Securities, which owns over 3 per cent and stands to make at least £29m. Willis and Poole founded the company in 2001 and floated it on the London stock exchange in 2006 with an initial valuation of £517m making their stakes then worth £30m each.