Financial adviser WH Ireland has struck a deal to sell its capital markets division to London-based investment bank Zeus Capital for up to £5m amid increasing consolidation among British stockbrokers.
The AIM-listed firm said on Monday that it had conditionally agreed for Zeus to acquire the capital markets arm’s corporate client contracts, employees, key supplier contracts, leasehold premises in Leeds and Bristol and the transfer of high net worth clients with accounts valued at around £600m.
The transaction is expected to occur by the middle of July at the latest. Zeus’ offer comprises an initial cash payment of £1 on completion of the deal and a deferred consideration of up to £4,999,999 to be paid within 30 days of the first anniversary of completion, based on the retainer and transaction revenue generated by the division within the 12 months.
The UK’s corporate brokers have struggled with a dearth of IPOs and a shrinking number of smaller London-listed companies in recent years, forcing more consolidation in the sector.
Recent tie-up deals have included Panmure Gordon and Liberum, Deutsche Bank and Numis, and Zeus buying Arden Partners last January. WH Ireland posted a pretax loss of £3.9m for the six months to last September.
WH Ireland said the deal was in line with its focus on returning the business to “sustainable profitability”, with an emphasis on “cost discipline” and restoring revenue growth in its capital markets and wealth management arms. It added that it would continue to explore “strategic opportunities” for parts of the group.
“The directors believe that the sale of the capital markets division will help to satisfy these objectives by immediately reducing the liabilities, as well as the working and regulatory capital requirements of the group, while also increasing potential cash inflows if and when the deferred consideration is paid, shortly following the first anniversary of completion of the transaction,” the firm said.
The combined businesses is expected to have more than 125 retained corporate clients and roughly 90 employees, making it the second-largest nominated adviser and broker for AIM firms.
Phillip Wale, chief executive of WH Ireland, commented: “We believe the combined business of Zeus Capital Limited and the WHI Capital Markets Division will represent a significantly enhanced platform for clients and employees, enabling them to manage the current market challenges and take advantage of a recovery in corporate activity from a position of strength as a leading independent investment bank in the UK.”