M and A

Owners Of Venerable UK Bank Move To Sell It Off After Difficult Financial Period

Tom Burroughes, Group Editor, London, 19 December 2016

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A bank tracing its history back 150 years is in the process of being sold off by its parent.

Duncan Lawrie, the banking and financial services group headquartered in the UK, is in the process of being sold by multi-sector parent Camellia plc. This is a reversal of the strategy to grow the business adopted last year last year. It follows comments by Camellia more than a year ago that low interest rates and other forces were making the trading environment more challenging.

Camellia, a group that operates in sectors as varied as agricultural produce, engineering and foodstuffs, has decided to sell "most of the Duncan Lawrie businesses", according to a statement issued to the London Stock Exchange today.

It is understood that Duncan Lawrie's business lines were considered below-scale in the current tough market environment of ultra-low interest rates and rising compliance costs, and that a sale of the business unit was the most sensible course. Financial losses have underlined pressures on the firm. In May, the bank appointed wealth management luminary Sally Tennant, a former chief executive of Kleinwort Benson, to chair its board and review operations. WealthBriefing understands that there may be job losses as a result of the sales; it is unclear at this stage about the extent and nature of any cutbacks that might happen. The transactions involving different parts of the Duncan Lawrie operation are also another example of merger and acquisition activity affecting UK wealth management, as seen in recent deals involving firms such as Tilney, Bestinvest, Schroders, Cazenove, Cheviot and Rathbones, for example.

This publication understands that the sale of the loan book, or most of it, is due to happen by the end of January this year.

Most of Duncan Lawrie’s UK loans and certain of its Isle of Man loans have been sold to Arbuthnot Latham, the UK-based private bank, for a cash payment of £42.7 million ($53.3 million), equal to to 95 per cent of the value of the outstanding loans of £44.9 million. Meanwhile, Camellia proposes an "orderly wind down" of Duncan Lawrie’s deposit-taking operations in the UK and Isle of Man. Once this sale is completed, Duncan Lawrie is fully funded to return all cash balances to clients, the statement said.
Separately, the Duncan Lawrie Asset Management business is being sold, in cash, for £28 million, to UK-listed Brewin Dolphin, a price which this publication understands equates to around 3.8 per cent of AuM, some way above recent M&A prices in asset management deals which have been below 2.5 per cent.) According to a statement by Brewin Dolphin today, it is acquiring AuM of £735 million, with around 1,000 clients. This will increase Brewin Dolphin's AuM, on a pro-forma basis, to £36.1 billion, it said.

As part of the transaction, the portfolio management team of Duncan Lawrie Asset Management Limited will move to Brewin Dolphin.

Trust services
Discussions are underway with a number of other parties in respect of the sale of Duncan Lawrie’s Isle of Man offshore trust services business, the statement said.

The trading profits relating to Duncan Lawrie's loan book in the year ending 31 December 2015 were £1.3 million and £0.8million in the six months to 30 June 2016. The trading profits relating to Duncan Lawrie Asset Management in the year ending 31 December 2015 were £2.2 million and £0.6 million in the six months to 30 June 2016.  These figures include costs which are not being transferred to the purchaser. The losses before taxationrelating to the whole of Duncan Lawrie for the year ended 31 December 2015 were £3.6 million and £2.8 million in the six months to 30 June 2016.  

The loss arising on sale of the loan book and significant closure costs of any proposed wind-down of Duncan Lawrie will be reflected in Camellia’s financial results for the year ended 31 December 2016.  The expected profit on disposal of Duncan Lawrie Asset Management and further operating costs relating to the proposed wind down will be reflected in Camellia’s financial results for the year ended 31 December 2017.

In its statement today, Arbuthnot Latham said that as at 31 October 2016 the loan portfolio it has acquired had total customer balances of approximately £44.9 million and comprised 83 customer accounts. The average loan to value of the portfolio was 43 per cent and the client yield was 5.21 per cent (for the month of October) before applying any yield adjustment for the negotiated discount, which was 5 per cent to the par value of the loans.

Duncan Lawrie traces its origins back by about 150 years to two Scottish managing agents who had done business in India, Alexander Lawrie and Walter Duncan.

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