Nuveen is buying Schroders in a £9.9 billion ($13.5 billion) deal, creating one of the world’s largest active asset managers with nearly $2.5 trillion of assets.
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The move ends more than two centuries of independence for the UK’s largest standalone asset manager, one of the few remaining vestiges of an age when the City of London’s merchant bankers ruled finance. The Schroders brand will be retained. London will serve as the combined group’s non-US headquarters and largest office, with around 3,100 staff.
“In a competitive landscape where scale can help deliver benefits” the combination will create “opportunities for our clients and people,” Schroders Chief Executive Officer Richard Oldfield said in a statement on Thursday. He will continue in the role and join Nuveen’s executive management team.
Under the terms of the transaction, each Schroders shareholder will receive a total of 612 pence, which includes a cash consideration of 590 pence — a premium of 29% over Wednesday’s closing price — and a dividend of 22 pence, according to the statement.
Shares of Schroders jumped as much as 31% in London and last traded at around 586 pence. They were down almost 25% over the past five years before the deal was announced.
Nuveen is a subsidiary and investment manager of Teachers Insurance and Annuity Association of America after it was
The sale of one of the City’s best known institutions to a group owned by a US pension fund highlights the challenges facing asset managers in the UK and continental Europe. The vast scale of US rivals and the rise of passive investing has piled pressure on costs and fees, prompting many European asset managers to acknowledge the need for consolidation.
Schroders itself has struggled in recent years, facing criticism for its relatively high cost base and slower organic growth in its private markets business, while firms like Aberdeen have been a perennial subject of takeover chatter.
The Schroder family’s decision to sell its storied asset management business echoes their move to exit the investment banking business at the turn of the millennium, as it became clear that Wall Street banks’ heft was becoming an insurmountable threat.
“Nuveen believes that the current highly competitive global asset management industry increasingly favours well‑capitalised investment firms with global footprints,” according to the statement. “Those firms’ managers are better positioned to absorb rising fixed costs, invest in differentiated capabilities and provide clients across channels with access to a widening set of asset classes.”
With $2.5 trillion of assets, the deal creates a firm with a scale to rival giants like Capital Group, the world’s biggest active-only manager with around $3 trillion. Still, it will lag far behind the likes of BlackRock, whose total assets of $14 trillion are underpinned by passive index investing and exchange-traded funds.
Shareholders including the family and Schroders directors, with a combined stake of about 42% of the company, have agreed to back the deal. Expected to conclude in the fourth quarter of this year, Nuveen is financing the transaction with existing cash resources and a £3.1 billion debt facility from BNP Paribas.
“With the offer being recommended, the family has clearly decided to move on, but the rest of us will be poorer for it,” Panmure Liberum analysts Rae Maile and Ross Luckman wrote in a note. RBC Capital analysts Ben Bathurst and Jude Neanor saw the offer as “compelling and a testament to the performance” delivered by Schroders’ management and added that the deal had a “positive readacross for the rest of the sector.”
A detailed integration plan for the businesses that employ a total of 9,600 staff will be developed in 12 to 18 months, until which Schroders will continue to operate as a standalone unit, run by its existing trio of executive directors for at least the next year, according to the statement.
Schroders has been pushing to build out its private markets capabilities as it seeks to generate higher fees and lock up client capital for longer. About 17% of the combined assets under management will be in private markets, with equities and fixed income making up 30% and 25%, respectively. More than half the group’s assets are in the Americas, with about 31% in the EMEA region and 12% in Asia.
In private markets, they will form a franchise with over $414 billion in assets — one of the industry’s largest alternatives platforms. Nuveen and Schroders will develop strategic partnerships with insurers and also expand their wealth channels.
The transaction comes almost five years after Schroders weighed its own bid for rival M&G, which would have created a second $1 trillion UK money manager behind Legal & General Group. But those talks never came to fruition and the absorption of Schroders into a larger American rival now removes a potential suitor for several other smaller UK firms in search of scale to remain competitive.
BNP Paribas advised Nuveen on the transaction while Wells Fargo, Barclays and JPMorganChase were advisers to Schroders, a filing showed.
