Under-pressure Alliance Trust hit the acquisition trail yesterday with a £14million takeover swoop for Brewin Dolphin’s Stocktrade platform.
The execution-only stockbroking business is expected to be fully subsumed within Alliance Trust Savings (ATS) – one of the Trust’s two main subsidiaries – by the autumn.
The move will increase the assets under management by ATS by £4.6billion to around £11.8billion and will take its customer base over the 100,000 mark.
The deal is the first significant move since the Dundee-headquartered Trust fended off a major crisis last month by negotiating a last-minute deal with activist investor Elliott Advisors.
The hedge fund – which had previously stated it saw little value in the subsidiary businesses – ditched its AGM resolutions in return for the appointment to the Trust’s board of two of three independent non-executive directors it nominated.
Although hostilities were put on hold, the Trust only has a year’s grace in which to demonstrate that investment performance is improving and their is real worth in the subsidiary businesses.
At the AGM, chief executive Katherine Garrett-Cox outlined a vision of increasing assets under management within ATS from around £7.3billion currently to £45billion by 2020 and said the growth would be achieved by a combination of organic and inorganic means. The plan for Alliance Trust Investments is to grow assets under management from £2bn to £10bn in the same timeframe.
Ms Garrett-Cox yesterday signalled that further bolt-on acquisitions for ATS were a possibility.
“Our strategy for ATS is to grow the business organically, but when appropriate acquisition opportunities present themselves that fit with our stringent criteria then these will be assessed,” she said.
“The acquisition by ATS of Stocktrade is an example of us putting this strategy into action and pursuing our ambitious growth targets.”
ATS’s purchase of Stocktrade – and the provision of up to £8million of cash required by regulators – is being funded by Alliance Trust PLC.
“Already this year we’ve grown assets organically by 12% and this acquisition takes us to over £11.5billion in assets under administration,” ATS managing director Patrick Mill said.
“Stocktrade is a great strategic fit for ATS, giving us access to new customers, an increase in assets and the opportunity to build a strategic partnership capability. It also gives us the ability to align a traditional stockbroking business with our innovative, scalable and cost-effective approach by offering customers online access alongside our in-house customer service team.
“Our priority now is to focus on driving growth organically and profitably through the three channels, direct, intermediaries and strategic partnerships.”
David Nicol, chief executive of Brewin Dolphin, said the sale was a good deal.
“It is consistent with our strategy of streamlining and simplifying our business and will further enhance shareholder value by allowing us to continue to focus on growing our core wealth management service,” he said.
Stocktrade will continue to operate from Edinburgh and its 50-strong team will transfer over to ATS under TUPE regulations.