Close Brothers strikes £200m deal to sell asset management business to Oaktree

Close Brothers Group has announced its agreement to sell its wealth management division, Close Brothers Asset Management (CBAM), to Oaktree Capital Management, L.P., in a deal valued at up to £200 million. The transaction is expected to be completed in early 2025, pending regulatory approval.

Key Deal Highlights

The transaction includes an upfront payment of approximately £172 million and a contingent deferred consideration of £28 million, payable in preference shares. The deal is contingent on regulatory approvals from the Financial Conduct Authority (FCA) and the Guernsey Financial Services Commission.

Close Brothers Chairman, Mike Biggs, said the decision follows a strategic review aimed at strengthening the company’s capital base. Biggs highlighted that the transaction is expected to boost the group’s common equity tier 1 (CET1) capital ratio by around 100 basis points, giving the company more flexibility in an uncertain financial landscape.

The sale will allow Close Brothers to focus on its core lending business while CBAM is expected to benefit from additional resources under Oaktree’s ownership, enhancing its future growth potential.

Rationale Behind the Sale

Close Brothers Asset Management has a strong presence in the UK wealth management sector, with a solid track record of growth. However, Close Brothers acknowledged that further investment would be required to maintain its competitive position. By selling CBAM, the company can focus its resources on its core businesses while realising a competitive valuation for CBAM.

The acquisition will allow Oaktree to scale up its UK wealth management operations. Oaktree Managing Director Federico Alvarez-Demalde expressed confidence in CBAM’s future, noting that the firm’s client-first culture will remain central as the business transitions to new ownership.

Impact on Close Brothers Group

The sale is expected to strengthen Close Brothers’ balance sheet and allow the company to focus on its core business. The group expects to increase its operating profit by £11 million for the 2024 financial year and reduce its liabilities by £70.2 million. The additional capital will help the group navigate challenging market conditions and continue its cost management initiatives.

Close Brothers is also expected to explore growth opportunities within its core lending business and its Winterflood division, which focuses on securities trading.

Industry Insight: Wealth Management Consolidation

The wealth management sector is seeing increasing consolidation, with private equity firms like Oaktree acquiring established firms. This trend allows them to leverage economies of scale and enhance service offerings in a competitive market. Oaktree’s acquisition of CBAM is in line with this trend, as it seeks to expand its wealth management operations in the UK.

The sale is a strategic move for Close Brothers, enabling it to simplify its operations while securing long-term growth prospects for its shareholders.