By Kristen McGachey
Of Financial News
Gresham House has significantly upped its stake in U.K. wealth manager Brooks Macdonald.
The London-based alternatives shop has more than doubled its holding in Brooks Macdonald, from 5.6% to 12.7% over the past two months, according to stock filings.
At Brooks Macdonald's share price of 2,000 pence as at Wednesday, this puts the value of Gresham House's stake at 41.8 million pounds ($53 million).
Ken Wotton, managing director of public equity at Gresham House, said Brooks Macdonald is a "high quality-business," adding that recent restructuring efforts and investment in the firm "should give it the platform to grow assets and drive high incremental profit margins as market conditions improve."
Wotton added that Brooks Macdonald operates in a "consolidating market where private equity is active," which should provide some downside protection for its shares.
Brooks Macdonald declined to comment.
Brooks Macdonald, which is listed on London's AIM market, has been the subject of much takeover speculation, as it has been hit by persistent net outflows and been forced to shave costs aggressively.
The wealth manager, which looks after GBP17.9 billion in client assets, announced plans to axe 50 jobs in October.
That same month, Reuters reported it had hired Raymond James to shore up a defense strategy to thwart a possible takeover.
Deutsche Numis analysts Kim Bergoe and David McCann said in an April research note that after making a number of acquisitions, Brooks Macdonald could become a takeover target itself.
Wotton said Gresham House doesn't invest in companies due to speculation around potential takeover offers.
"However, given the low valuation multiples in U.K. smaller companies private equity has been actively targeting high-quality businesses at attractive valuations," he said.
Other established U.K. players have found themselves at risk of being swallowed up by private equity, following a turbulent time for the industry, which has seen valuations slump.
Hargreaves Lansdown is currently reviewing an offer from a consortium of buyout giants, including CVC and Nordic Capital, to acquire the fund supermarket for GBP5.4 billion.
Gresham House went private last year when it was acquired by Searchlight Capital Partners for GBP470 million, a move that saw it delist from London's junior stock exchange.
Brooks Macdonald has overhauled its leadership team as the firm has struggled to turn its fortunes around.
Maarten Slendebroek, Jupiter's former chief executive, was brought in to chair the wealth manager last year and on Monday the group revealed CEO Andrew Shepherd would be replaced by Andrea Montague.
Brooks Macdonald announced in March it had put its international business under review, writing down the goodwill on the unit by nearly GBP12 million.
Financial News is owned by News Corp, the parent company of The Wall Street Journal and Dow Jones Newswires.
Write to Kristen McGachey at kristen.mcgachey@dowjones.com
Website: www.fnlondon.com
(END) Dow Jones Newswires
June 26, 2024 10:21 ET (14:21 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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