TIDMQLT
RNS Number : 2715U
Quilter PLC
01 April 2021
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
1 April 2021
Quilter PLC
("Quilter" or the "Group")
PROPOSED SALE OF QUILTER INTERNATIONAL TO UTMOST GROUP LIMITED
("UTMOST") FOR APPROXIMATELY GBP 483 MILLION ;
SIMPLIFIES QUILTER AS A HIGHER GROWTH, UK FOCUSED, WEALTH
MANAGER
TRANSACTION HIGHLIGHTS:
-- Proposed sale of Quilter International to Utmost (the
"Sale"), following a detailed strategic review. The Sale is
unanimously agreed by the Quilter Board to be in the best interests
of shareholders, taken as a whole, and is expected to support the
continued delivery of good outcomes for customers and other
stakeholders.
-- Total consideration for the Sale is anticipated to be
approximately GBP483 million, inclusive of a 5% interest charge on
the base consideration of GBP460 million from 1 January 2021 to
Completion of the Sale ("Completion") (assuming Completion at 31
December 2021), implying a price to 2020 Solvency II Own Funds
multiple of 0.84 x.
-- Completion of the Sale is expected to occur around end-2021,
conditional on Quilter shareholder approval, customary regulatory
approvals in the Isle of Man, Ireland, Hong Kong, Singapore and the
Dubai International Financial Centre, and anti-trust approval from
the European Commission.
STRATEGIC BENEFITS FOR QUILTER:
-- The Sale will simplify Quilter and focus the Group on its
higher growth UK wealth management business. From the beginning of
2022 Quilter will target annualised Net Client Cash Flow ("NCCF")
growth of at least 6 percent of opening AuMA in the medium term, an
increase from the Group's previous 5 percent per annum target
reflecting the revised corporate perimeter which will exclude the
lower growth Quilter International business.
-- Quilter expects to deliver a standalone operating margin of
at least 25% in 2023 and at least 30% by 2025, after absorbing
stranded costs and subject to normal market conditions. A portion
of the net cash proceeds from the Sale are expected to be utilised
to accelerate selected growth and optimisation initiatives to
enhance revenue and support cost reductions.
-- The Group will provide further detail of its UK focused
growth strategy and financial targets at a Capital Markets Day
expected to be held during the fourth quarter of 2021.
CAPITAL DISCLIPLINE AND USE OF PROCEEDS:
Quilter remains committed to capital discipline which has been
demonstrated through meaningful shareholder distributions following
divestments of Quilter Life Assurance and Old Mutual Global
Investors.
-- Net cash proceeds of approximately GBP450 million are
expected from the Sale after allowing for transaction costs.
o An allocation from these net cash proceeds is expected to be
applied as a contribution from Quilter International to Quilter's
Full Year 2021 dividend on a pro rata basis to earnings for
calendar 2021.
o Further, the Board of Quilter is currently minded to undertake
a capital distribution to shareholders of the majority of the net
cash proceeds. A final decision on quantum and mechanism of
distribution will be made at the time of Completion of the sale,
after taking account of prevailing market and business conditions,
as well as potential opportunities for business investment.
o Quilter will continue to engage with its shareholders on the
range of strategic growth opportunities available to the Group and
the optimum means of returning capital prior to reaching any
conclusions in this regard. Any such distribution will be subject
to normal regulatory approvals.
o The residual portion of the net cash proceeds from the Sale
are expected to be used to fund selected growth initiatives and
accelerate the next phase of optimisation, supporting revenue
enhancement and further cost reductions, and thereby delivering
operating margin improvements.
-- Quilter will recommence the return of the residual GBP200
million Quilter Life Assurance sale proceeds, with an initial
tranche of GBP50 million of the next GBP100 million of regulatory
approved buyback expected to commence shortly.
Paul Feeney, Chief Executive of Quilter, said:
"Following a detailed strategic review, we are delighted to
announce the proposed sale of Quilter International to Utmost which
represents an attractive valuation for our shareholders and an
excellent outcome for all stakeholders. It allows us to focus on
accelerating our growth and efficiency plans as well as further
simplifying and focusing our business around its core UK high net
worth and affluent customer proposition. It also gives us the
ability to deliver a further meaningful capital distribution to
shareholders. With the recent completion of our platform
transformation programme, we are set up for strong growth.
I would like to thank all our Quilter International colleagues
for their dedication, professionalism and service to our customers,
which has resulted in the creation of such a strong franchise. I am
confident that the agreement we have reached with Utmost will
ensure the continued success of the business, with a focus on
delivering good customer outcomes, as well as providing a range of
career opportunities for Quilter International's employees within
an enlarged international business."
Paul Thompson, Chief Executive of Utmost, said:
"This is a highly attractive acquisition for Utmost and
underscores the importance of our Utmost International business.
Quilter International is highly complementary to our existing
International business from both an operational, product and
distribution perspective.
I look forward to welcoming all the staff, customers and
distribution partners to our Group. We are delighted to work with
Quilter on this transaction and look forward to a productive
partnership in the future."
This summary should be read in conjunction with the full text of
this announcement. This announcement is available at
www.Quilter.com/investor-relations. A Circular containing details
of the Sale and a Notice convening a General Meeting of Quilter
will be sent to Quilter shareholders as soon as is practicable.
A presentation by Paul Feeney, CEO, & Mark Satchel, CFO,
will be held via conference call at 08:30am BST today. This will be
followed by a live Q&A session. We strongly advise dialling in
five to ten minutes prior to the start of the presentation.
Conference call details:
UK/Other: +44 3333 000 804
SA: +27 21 672 4118
USA: +1 631 913 1422
Access code: 59948787#
Enquiries:
Quilter
Investor Relations:
John-Paul Crutchley +44 (0) 77 4138 5251
Keilah Codd +44 (0) 77 7664 9681
Media:
Jane Goodland +44 (0) 77 9001 2066
Camarco
Geoffrey Pelham-Lane +44 (0) 77 3312 4226
Goldman Sachs International +44 (0) 20 7774 1000
Joint Financial Adviser, Corporate Broker and UK Sponsor
Richard Cormack
James Lucas
Warren Stables
JP Morgan Cazenove +44 (0) 20 7742 4000
Joint Financial Adviser, Corporate Broker and JSE Transaction
Sponsor
Anna Franekova
James A. Kelly
Thembeka Mgoduso
1. Introduction
Quilter announces that it has entered into an agreement with
Utmost Holdings Isle of Man Limited, a subsidiary of Utmost Group
Limited with respect to the sale of Quilter International, which is
comprised of Quilter's entire shareholding in Quilter International
Holdings Limited and Quilter International Ireland dac.
The consideration payable to Quilter pursuant to the Sale
comprises a base consideration of GBP 460 million plus a 5%
interest charge on this sum for the period from 1 January 2021 to
Completion, representing estimated total consideration of
approximately GBP483 million payable in cash on Completion
(assuming Completion on 31 December 2021). This represents a price
to 2020 Solvency II Own Funds multiple of 0.84 x. Quilter has the
option of Quilter International declaring a pre-completion dividend
of up to GBP15 million in which case the base consideration of
GBP460 million will be reduced by a commensurate amount.
Net cash proceeds on Completion are expected to be approximately
GBP 450 million after allowing for transaction costs.
2. Background to and reasons for the Sale
Quilter International has been an important part of the Group
for many years and constitutes a well-regarded business, with a
strong position in offshore wealth management across the markets in
which it operates. However, Quilter International is less
strategically aligned to Quilter's UK proposition, with limited
connectivity to the rest of the UK business. The customer overlap
between Quilter's UK customers and Quilter International has
reduced in recent years with an increasing proportion of Quilter
International sales coming from non-UK customers.
Furthermore, the financial profile of Quilter International
differs from the rest of Quilter. Quilter International is a life
insurance savings business, with a higher margin back-book which is
running off faster than lower margin new business is being written.
As a consequence, Quilter International's annualised NCCF as a
percentage of opening AuMA has been at a lower rate than that of
the rest of Quilter and its revenue contribution has been on a
declining annual trend.
The Group has undertaken considerable actions over the last few
years to reduce costs within Quilter International to offset the
reduction in revenue. Under Quilter's continued ownership, Quilter
International would have required investment to support further
cost reduction in order to maintain profitability and facilitate
cash distributions. Given the value that could be received for
Quilter International, and the ability to redeploy capital
investment into the core UK business, the Board concluded that it
would be in shareholders' best interests to conduct a strategic
review to determine the best option for continued value
creation.
The Group received multiple offers for Quilter International and
the Board has unanimously concluded that the offer by Utmost to
acquire the business for an estimated total consideration of
approximately GBP483 million should be recommended to shareholders.
The Board believes the Sale will realise a higher value than could
be generated from Quilter's continued ownership, taking the further
investment requirements into account and the associated execution
risks. It will also enable the Group to consider undertaking a
capital distribution of the majority of the net cash proceeds to
shareholders.
Within Utmost's larger international business, where it will be
considered a core element of the franchise, Quilter International
will be better positioned to maintain its focus on delivering good
customer outcomes. Quilter believes that the transaction will also
provide a wide range of career opportunities for Quilter
International's employees within an enlarged international
business.
3. Information on Quilter International
Quilter International is an investment platform provider of
cross-border investment solutions aimed primarily at affluent and
high net worth UK residents seeking investment solutions outside of
the UK, as well as expatriates and international investors in
selected offshore markets. It began operating in the Isle of Man in
1984, growing to become a top three offshore wealth manager. It is
headquartered in the Isle of Man with a regulated presence in the
Isle of Man, Ireland, Hong Kong, Singapore, and the Dubai
International Financial Centre.
Quilter International had assets under administration and
management of GBP21.8 billion in the financial year ended 31
December 2020, with c.90 thousand policies and gross sales of
GBP1.6 billion. Quilter International offers its investment
solutions through its main products: Select Bond, Portfolio Bond,
Wealth Bond and Wealth Interactive and Trust planning.
In the year ended 31 December 2020, Quilter International
contributed revenues of GBP118 million (on an adjusted basis) and
IFRS profit before tax of GBP57 million to Quilter. The 2020 profit
before tax included c.GBP8 million of tactical cost savings that
are not expected to recur in 2021. As at 31 December 2020, Quilter
International had total assets of GBP22.6 billion and Solvency II
Own Funds of GBP575 million. To end 2020, Quilter International had
contributed c.GBP10 million of Quilter's optimisation cost savings
of GBP46 million on a run-rate basis (see Appendix for further
financial data on Quilter International).
4. Summary of terms of the Sale
The consideration payable to Quilter pursuant to the Sale
comprises a base consideration of GBP460 million plus a 5% interest
charge on the base consideration for the period from 1 January 2021
to Completion, representing an estimated total consideration of
approximately GBP483 million payable in cash on Completion (and
assuming Completion on 31 December 2021). This represents a price
to 2020 Solvency II Own Funds multiple of 0.84 x.
Net cash proceeds on Completion are expected to be approximately
GBP 450 million after allowing for transaction costs.
The Sale constitutes a Class 1 transaction for Quilter under the
UK Listing Rules and Completion of the Sale is therefore
conditional on, inter alia, the approval of Quilter shareholders at
a General Meeting of shareholders.
The Sale is also subject to customary regulatory approvals in
the Isle of Man, Ireland, Hong Kong, Singapore and the Dubai
International Financial Centre and anti-trust approval from the
European Commission, which are all currently expected to be
received by the end of the fourth quarter of 2021. A Circular
containing further details of the Sale and a Notice convening the
General Meeting will be sent to Quilter shareholders as soon as
practicable.
As is usual in transactions of this nature, the Sale Agreement
sets out the required approvals that must be obtained and the
obligations on the parties to obtain them, as well as customary
warranties and a customary "no leakage" covenant based on the 31
December 2020 accounts date. Quilter has the option of Quilter
International declaring a pre-completion dividend of up to GBP15
million in which case the base consideration of GBP460 million will
be reduced by a commensurate amount. The transaction documentation
also includes a customary tax indemnity, certain transitional
services to be provided between Quilter and Quilter International,
and a transitional licence permitting Quilter International to
continue to use the Quilter brand, for a limited period following
Completion.
5. Use of proceeds and financial effects of the Sale
Use of proceeds
The Sale will have an immediate positive impact on Quilter's
capital and liquidity position. Following Completion, and prior to
any distribution, the Group is expected to have a Solvency II ratio
of c.270%.
An allocation from these net cash proceeds is expected to be
applied as a contribution from Quilter International to Quilter's
Full Year 2021 dividend on a pro rata basis to earnings for
calendar 2021. Further, the Board of Quilter is currently minded to
undertake a capital distribution of the majority of the net cash
proceeds to shareholders. A final decision on the quantum and
mechanism of distribution will be taken at the time of Completion
in light of prevailing market and business conditions, as well as
potential opportunities for business investment. Quilter will
continue to engage with its shareholders on strategic opportunities
and optimum means of returning capital ahead of reaching any
conclusions in this regard. Any such distribution will be subject
to normal regulatory approvals.
The remainder of the net cash proceeds are expected to be used
to fund selected growth initiatives and accelerate the next phase
of cost optimisation, supporting revenue enhancement and further
cost reductions, and thereby delivering operating margin
improvements.
Financial effects of the Sale on the Retained Group
Following the Sale, the Group is expected to be a higher growth
business and from the beginning of 2022 Quilter will target
annualised NCCF growth of at least 6 percent of opening AuMA in the
medium term, an increase on its current 5 percent per annum target
reflecting the exclusion of the lower growth Quilter International
business from the ongoing corporate perimeter. Subject to
delivering currently expected AuMA volumes and business mix from
these selected growth initiatives, the Directors believe the
Group's overall annual rate of revenue margin decline should slow
in the near-term, and the Group's revenue margin should become
increasingly stable.
Management will implement a series of optimisation initiatives
which are expected to increase the Group's standalone operating
margin from c.20% in 2020 on a pro forma basis (excluding stranded
costs of c.GBP8 million expected to arise post-Completion) to at
least 25% by 2023 and at least 30% by 2025, after absorbing
stranded costs and subject to normal market conditions. The Group
intends to provide an update on these initiatives at a Capital
Markets Day expected to be held during the fourth quarter of
2021.
6. Summary information on the Retained Group and future
strategy
Following Completion, Quilter will be a simpler business with a
clear focus on its leading market position in the UK wealth
management sector. The Group will continue to help manage and
create wealth for high net worth and affluent customers through its
unique combination of capabilities across the wealth value chain.
It will continue to provide customers with the services to develop
suitable financial plans, manage investments in attractive
solutions (in line with their objectives and risk appetites) and
provide access to modern wealth wrappers via the Group's platform.
The Group's purpose and strategy will continue to be underpinned by
its core beliefs, of better choice for customers, sound financial
advice, and modern, simple and transparent products which are
easily accessible.
Following the completion of the migration of customers and
advisers onto the Group's new UK Platform technology earlier this
year, the Directors believe Quilter is now well placed to
accelerate growth in NCCF. This will be achieved through capturing
a greater share of new business from its own restricted financial
planners as well as looking to grow market share in the open market
channel which serves independent financial advisers. The Group
believes the product and functional capability of its new UK
Platform combined with its traditional strengths in supporting and
servicing advisers will deliver propositions that will be regarded
as market leading.
Quilter's strategy is to create value for shareholders through
maintaining and strengthening the competitiveness of its customer
proposition across all the Group's segments. The Group is focused
on leveraging the strength of its two strong distribution channels,
new Platform technology, and outcome-based investment solutions
offering, delivering these from an efficient operating base, to
generate an attractive and sustainable level of earnings.
The Group's existing dividend guidance of a pay-out ratio at the
upper end of its policy range of 40% to 60% remains unchanged.
Quilter and Utmost will also work together to ensure a range of
modern, flexible international life assurance products will
continue to be available to all participants on the Quilter
Platform.
The Board expects the execution of Quilter's strategy to result
in improved customer satisfaction, enhanced earnings and increased
returns for shareholders.
7. Information on Utmost
Quilter International will be acquired by Utmost Isle of Man
Holdings Limited, a subsidiary of Utmost Group Limited.
About Utmost Group Limited
Utmost Group Limited is a specialist life assurance group. Its
principal businesses are Utmost International and Utmost Life and
Pensions, which together are responsible for over GBP37 billion of
primarily unit-linked policyholder assets for around 510,000
customers.
Utmost Group Limited is authorised and regulated by the UK's
Prudential Regulation Authority as lead regulator with subsidiaries
or branches regulated in numerous jurisdictions including the Isle
of Man, Ireland, Singapore and Hong Kong.
About Utmost International
Utmost International provides international life assurance to
affluent, high-net-worth and ultra-high-net-worth individuals
through Utmost Wealth Solutions, and group risk and savings
solutions to multi-national corporates through Utmost Corporate
Solutions.
In 2020, Utmost International had GBP30 billion of assets under
administration, 130,000 customers, and wrote GBP1.6 billion of new
business premiums. It was formed through the acquisition of
insurers that were previously owned by major insurance groups.
Uniting them under a common strategy and achieving significant
synergies has created a financially and operationally robust
insurance group that is strongly positioned to win new
business.
About Utmost Life and Pensions
Utmost Life and Pensions is a specialist UK life consolidator,
focused on the acquisition of life assurance businesses in the UK.
It was formed through the demutualisation and acquisition of the
Reliance Mutual and Equitable Life businesses. It looks after
380,000 customers with GBP7 billion of assets under administration.
Utmost Life and Pensions is authorised by the PRA, and regulated by
the FCA and the PRA.
8. Expected timetable to Completion
A Circular containing further details of the Sale, the Board's
recommendation, and the Notice of the General Meeting and the
resolution required to approve the Sale will be sent to Quilter's
shareholders as soon as practicable. Completion is expected to
occur around the end of the calendar year 2021.
9. Advisers
Goldman Sachs International and JP Morgan Cazenove are acting as
Joint Financial Advisers and Corporate Brokers to Quilter in
relation to the Sale. Goldman Sachs International is acting as UK
Sponsor to Quilter in relation to the Sale. JP Morgan Equities
South Africa Proprietary Limited is acting as JSE Transaction
Sponsor. Allen & Overy LLP is acting as legal adviser to
Quilter.
Important information relating to financial advisers
Goldman Sachs International, which is authorised by the
Prudential Regulatory Authority and regulated by the Financial
Conduct Authority and the Prudential Regulatory Authority in the
UK, is acting exclusively for Quilter and for no one else in
connection with the matters described in this document and is not,
and will not be, responsible to anyone other than Quilter for
providing the protections afforded to its clients nor for providing
advice in connection with the matters set out in this document.
JP Morgan Cazenove, which is authorised by the Prudential
Regulatory Authority and regulated by the Financial Conduct
Authority and the Prudential Regulatory Authority in the UK, is
acting exclusively for Quilter and for no one else in connection
with the matters described in this document and is not, and will
not be, responsible to anyone other than Quilter for providing the
protections afforded to its clients nor for providing advice in
connection with the matters set out in this document.
Forward looking statements
This document contains statements which are, or may be deemed to
be, "forward looking statements" which are prospective in nature.
All statements other than statements of historical fact are
forward--looking statements. They are based on current expectations
and projections about future events and are therefore subject to
risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the
forward--looking statements. Often, but not always, forward looking
statements can be identified by the use of forward looking words
such as "plans", "expects", " is expected", "is subject to",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates", "believes", "targets", "aims", "projects" or words
or terms of similar substance or the negative thereof, are
forward--looking statements, as well as variations of such words
and phrases or statements that certain actions, events or results
"may", "could", "should", "would", "might" or "will" be taken,
occur or be achieved. Such statements are qualified in their
entirety by the inherent risks and uncertainties surrounding future
expectations. Forward--looking statements include statements
relating to (a) future capital expenditures, expenses, revenues,
earnings, economic performance, indebtedness, financial condition,
dividend policy, losses and future prospects, (b) business and
management strategies and the expansion and growth of Quilter's
operations, and (c) the effects of global economic conditions on
Quilter's business.
Such forward looking statements involve known and unknown risks
and uncertainties that could significantly affect expected results
and are based on certain key assumptions. Many factors may cause
actual results, performance or achievements of Quilter to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Important factors that could cause actual results,
performance or achievements of Quilter to differ materially from
the expectations of Quilter, include, among other things, general
business and economic conditions globally, industry trends,
competition, changes in government and other regulation and policy,
including in relation to the environment, health and safety and
taxation, labour relations and work stoppages, interest rates and
currency fluctuations, changes in its business strategy, political
and economic uncertainty and other factors. Such forward--looking
statements should therefore be construed in light of such factors.
Neither Quilter nor any of its directors, officers or advisers
provides any representation, assurance or guarantee that the
occurrence of the events expressed or implied in any
forward--looking statements in this document will actually occur.
You are cautioned not to place undue reliance on these
forward--looking statements, which speak only as of the date
hereof. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules and the
Disclosure and Transparency Rules), Quilter is not under any
obligation and Quilter expressly disclaims any intention or
obligation to update or revise any forward--looking statements,
whether as a result of new information, future events or
otherwise.
The release, publication or distribution of this announcement in
jurisdictions other than the United Kingdom may be restricted by
law and therefore any persons who are subject to the laws of any
jurisdiction other than the United Kingdom should inform themselves
about, and observe, any applicable requirements. This announcement
has been prepared for the purposes of complying with the UK Listing
Rules and the information disclosed may not be the same as that
which would have been disclosed if this announcement had been
prepared in accordance with laws and regulations of any
jurisdiction outside of England.
Cautionary statement
This announcement is not intended to, and does not constitute,
or form part of, any offer to sell or an invitation to purchase or
subscribe for any securities or a solicitation of any vote or
approval in any jurisdiction. Shareholders are advised to read
carefully the formal documentation in relation to the Sale once it
has been despatched. Any response to the proposals should be made
only on the basis of the information in the formal documentation to
follow.
Quilter's PLC's LEI number is: 54930092XIVK28RZGM95
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of Quilter is Patrick Gonsalves, Company Secretary.
Appendix: Key financial data for Quilter International
GBPm unless stated 2018 2019 2020
Alternative performance measures
AuMA (GBPbn) 18.3 20.5 21.8
Gross sales (GBPbn) 1.8 2.0 1.6
NCCF (GBPbn) 0.3 0.5 0.3
Total net fee
revenue(1) 135 125 118
IFRS
Profit before
tax 43 48 57
Profit after tax 43 47 56
Solvency 2 own funds(2) 575
Carrying value (including goodwill)(3) 326
1. On an adjusted basis, as reported in the Supplementary
Information to Quilter's 2020 Full Year Results.
2. Based on Isle of Man Financial Services Authority basis for
own funds for Quilter International Isle of Man and the Solvency II
basis for own funds for Quilter International Ireland.
3. Estimated, subject to 2021 audit.
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