Royal Bank of Canada last month launched a £963 million agreed offer to acquire BlueBay asset management, a leading European independent credit asset manager with $40 billion of assets under management. The Canadian bank clearly intends to secure the prize with a knockout bid. Not only is RBC offering cash to BlueBay shareholders, its bid comes at a 29% premium to the close the night before the agreed deal was announced and at a 57.7% premium to the average share price over the three months leading up to the offer on October 15.
No wonder, then, that BlueBay’s board has recommended acceptance. While the company, founded in 2001 and floated on the London stock exchange in 2007, has been an undoubted success, almost doubling assets since the start of 2008, equity investors have had a rocky ride. Shares worth 300p at flotation in late 2007 slipped to a low of 64p amid the financial system crisis at the end of 2008, before recovering throughout 2009.
At 3.785% of assets under management, the valuation looks rich compared with other asset management deals, including RBC’s own purchase in 2008 of a more traditional institutional fixed-income manager, Phillips, Hager & North, at closer to 2% of assets under management.
