In a show of confidence that strengthens the Rothschild family’s grip on its Paris-listed investment bank, the financial dynasty said Monday it plans to take Rothschild & Co. private.
Rothschild & Co., best known for its deal-making division that once employed French President Emmanuel Macron, has grown over the last three decades beyond pure advisory for mergers and acquisitions and into wealth management, private equity and debt financing.
That development, formerly led by David de Rothschild, 80, and now by his son Alexandre, means the family doesn’t need as much access to capital from the public equity markets, the family holding Concordia said in a statement.
“Furthermore, each of the businesses is better assessed on the basis of their long-term performance rather than short-term earnings,” Concordia added.
“This makes private ownership of the Group more appropriate than a public listing.”
The announcement didn’t come as a shock to some analysts.
“They’re getting big in the private equity business and they want to make the most of it for themselves,” the analyst said, adding that volumes traded on the stock had been low.
“With interest rates rising, better to do it now rather than later if they need bank financing.”
At a time of slower M&A activity and falling advisory fees, taking the family-held firm private would shield its activities from the day-to-day scrutiny and pressure from the markets.
Revenue from deal-making at the five largest US banks slumped 53% in the fourth quarter from a year earlier, according to data compiled by Reuters.
In Europe, investment banking income at Deutsche Bank and UBS Group dropped 71% and 52% respectively in the last three month of 2022.
Under the current take-private plan, Concordia, Rothschild & Co.’s largest shareholder, is poised to file a tender offer for the investment bank’s shares at 48 euros each, Rothschild said in a statement. Concordia is the No. 1 vehicle of the family holdings in the company, with a 38% stake.
The price represents a premium of 19% compared to Rothschild & Co.’s closing stock price on Friday of 40.25 euros, and a 34% premium to the volume-weighted average share price of the last four months.
Rothschild’s shares surged 16.5% in morning trading to 46.9 euros per share, valuing the group at 3.6 billion euros ($3.88 billion).
The private ownership plan will be submitted to shareholders on May 25, the investment bank said, adding that an exceptional dividend of 8 euros per share would be paid if Concordia follows suit with its buyout offer.
The Rothschild family owned close to 55% of the bank’s shares and 69% of exercisable voting rights at the end of last year, according to the bank’s website.
Rothschild & Co. posted revenue of 2.2 billion euros for the first nine months of 2022, with gains across all business lines from deal advisory to wealth and asset management, as per its latest earnings report.
However, the group warned of a “more challenging year” ahead, with lower deal activity and declining assets under management impacting fee income.
Rothschild & Co. said it would provide further details on the private ownership plan on Feb. 13, when it reports full-year results.
Rothschild & Co. was first listed in Paris under the name Paris-Orleans in 1838. Listed rivals in the financial advisory business include Lazard, Perella Weinberg Partners and Evercore.