The iconic Rothschild family, whose accumulated if mostly hidden wealth is according to some among the world's greatest fortunes, is planning to take its flagship investment bank, Rothschild & Co, private. The bank, whose predecessors helped finance the Duke of Wellington’s victory over Napoleon in 1815 at the battle of Waterloo, announced Monday that its main shareholder plans a tender offer valuing the firm at about €3.7 billion, or $4 billion.
The move, which comes at a time when many of its peers are going the opposite route and seeking public capital, would end public ownership of a firm that in one form or another has been listed since 1838, according to a spokeswoman. As Bloomberg notes, the private buyout will mark the latest step in the family’s efforts to cement control, after a 2012 reorganization effectively brought the French and British businesses under one roof and simplified the organization structure.
Like most standalone contemporary investment banks, the Paris-based firm generates the majority of its revenue from providing financial advisory to what can easily be called the deepest rolodex in the world, though it also has a wealth and asset management unit as well as merchant banking business. Led by the 42-year-old Alexandre de Rothschild since 2018 (whose great, great, great, great grandfather is Mayer Amschel Rothschild, founder of the Rothschild dynasty), the bank has been expanding in the US and managed to sidestep much of the slump in the market for deal advisory, ranking 6th by the number of mergers and acquisitions last year according to Bloomberg.
Rothschild & Co has three divisions: global advisory, wealth and asset management, and merchant banking. “None of the businesses of the group needs access to capital from the public equity markets,” Concordia, a holding company for the family, said in a statement smugly, at a time when so many of its peers are hurting for advisory revenue. “Furthermore, each of the businesses is better assessed on the basis of their long-term performance rather than short-term earnings. This makes private ownership of the group more appropriate than a public listing."
The Rothschild family’s intention to take their boutique company private runs counter to the trend of the past two decades when a wave of smaller advisories such as Evercore and Lazard sought public listings in the US.
Concordia, which is the Rothschilds' family holdings company and already owns 38.9% of the firm’s shares and 47.5% of the voting rights, said it expects to offer €48 a share, a premium of 19% over the closing price on Friday for the shares it doesn't already own. Rothschild’s shares rose 17% to €47.
The going-private plan comes three months after Evelyn de Rothschild, the former head of the British arm of the banking group, died at age 91. Evelyn and his cousin David de Rothschild, who oversaw the French arm, united the two branches in a move that was seen as a key step in remaining competitive. David took managerial control of the U.K. side of the business in 2004 after his cousin Evelyn retired. Under his leadership and that of his son, the center of power at the lender moved further to Paris. David de Rothschild’s side of the family has 39.42% of Concordia’s voting rights, while his cousin Eric de Rothschild’s has 55.6%, according to Rothschild’s annual report.
Four years ago, there was a changing of the guard at the bank, when David de Rothschild stepped aside and passed the reins to his son Alexandre, who became the seventh generation of the family to lead the bank. Under the younger de Rothschild’s leadership, it has sought to diversify from its core French and British advisory business, expanding in the US where it has historically struggled and into private equity.
Concordia said it’s currently in advanced negotiations with investors and banks to finalize the financing of the deal. If the talks are successful, it intends to file its offer by the end of the first half of 2023.
Rothschild & Co. said it plans to offer a €1.4 dividend to shareholders at its next annual general meeting on May 25. The firm will also propose a €8 exceptional dividend, should Concordia decide to file its offer. The price of the offer would be adjusted downwards by those amounts.
According to the FT, Rothschild & Co has worked on some of the biggest deals in Europe over the past year, including Volkswagen’s initial public offering of Porsche, Covéa’s $9bn acquisition of Partner Re, the nationalisation of German energy group Uniper and the combination of satellite operators Eutelsat and OneWeb. Its Q3 revenues of €864 million was up 30% year on year. Revenues in global advisory, its largest business, increased 18% year on year to €547 million during the same period. The group warned that 2023 was likely to be a more challenging year given the macroeconomic and geopolitical environment.
In a statement, Rothschild & Co said it had “taken note of the proposed transaction” and had appointed Finexsi, a Paris-based financial advisory company, as an independent expert to deliver a fairness opinion.
The Rothschild firm was founded by Mayer Amschel, who started out buying and selling old coins in a Frankfurt ghetto. In the early 1800s, he sent his five sons to establish bases of Rothschild in London, Paris, Naples, Vienna and Frankfurt. He was successful, and today his descendants are intimately and extensively involved in virtually all aspects of global banking.
The Rothschild name has been the center of dispute between branches of the family for years. In 2018, the firm settled a long-running disagreement with wealth manager Edmond de Rothschild (Suisse) SA, which is managed by a different branch of the family, over the use of the name. As part of that deal, the two companies agreed to unwind their cross-shareholdings.
Mon, 02/06/2023 - 22:40