Wednesday 15 April 2020 3:09 pm

Tilney and Smith & Williamson merger delayed by coronavirus crisis

The merger between Tilney and Smith & Williamson has been delayed by the coronavirus pandemic with significant doubts remaining as to whether it will go ahead.

Smith & Williamson shareholder AGF Management told the Toronto Stock Exchange today that the deal would continue with a revised structure with the targeted closing date pushed back until the second half of the year.

However, AGF said it was not certain the deal would go ahead.

“While all parties remain committed to the merger, given the covid-19 situation and the fact that the revised structure has not yet been agreed, there can be no certainty that the transaction will proceed,” the statement said.

City A.M. reported last month that the coronavirus pandemic and the ensuing economic crisis had left the deal on the brink.

Wealth manager Tilney – which is backed by private equity firm Permira – announced in September it had agreed to acquire wealth manager and accountancy firm Smith & Williamson in a £625m deal.

AGF said the two businesses had extended the original expiry date of the merger (16 April) to agree a new transaction structure intended to meet final regulatory approval.

The Financial Conduct Authority was reportedly concerned that the combined business would carry too much debt under the original transaction structure.

AGF said: “Significant progress has been made toward a revised transaction structure, including a material new equity investment and thus a significant reduction in the external debt levels of the post-completion combined group.”

The two sides expect to confirm if agreement has been reached by the end of May.

The new structure would require approval from regulatory and competition authorities and Smith & Williamson shareholders.

If the deal does go ahead, it would be expected to complete in the second half of the year.

David Cobb and Kevin Stopps, co-chief executives of Smith & Williamson, said: “We continue to believe in the compelling strategic rationale of this merger and are pleased to report that significant progress has been made towards revisions to Tilney’s transaction structure that address the points raised by the FCA.

“However, in light of the extraordinary circumstances created by the covid-19 pandemic, the transaction process has inevitably been delayed.

“If the parties can agree amendments to the transaction structure that the Smith & Williamson board is able to recommend, we will ask our shareholders to vote on whether the revised transaction should go ahead.”

In September when the deal was announced, the pair said the combined business would have an enterprise value of £1.8bn, with revenue of around £500m and profit of £150m.

Tilney agreed to buy out Smith & Williamson shareholders with consideration of £625m, through a combination of cash and shares in the combined group.

In 2017 Smith & Williamson held an unsuccessful round of merger talks with wealth manager Rathbones.

Tilney launched an alternative bid, but Smith & Williamson chose instead to pursue a deal with Rathbones that ultimately collapsed.