The Rothschilds have enlisted some of Europe’s wealthiest families, including the billionaire brothers behind luxury group Chanel, to help take the Franco-British investment bank private, in a deal that values one of the best-known names in global finance at €3.7bn.
Concordia, the Rothschild family holding company that controls the bank, said on Monday that four industrial dynasties will accompany it in a buyout of minority investors and become long-term stakeholders in a business that encompasses global advisory, merchant banking, and asset and wealth management.
Among major new investors, the Rothschilds have tapped the Peugeot family, known primarily for its links to the eponymous car company; Mousse Partners, which manages investments for the Wertheimer brothers that own Chanel; and Hannah Rothschild, an author and film-maker who is part of the British strand of the Rothschild family.
France’s Dassault family, with investments stretching from newspapers to aviation, as well as Italian entrepreneur Giammaria Giuliani will also take part. The Dassaults and Giuliani were already investors in Rothschild alongside Concordia.
François Pérol, managing partner of Rothschild & Co, told the Financial Times that “the idea for the family is to take the group completely private and to do so with investors with a similar frame of mind, who have a family-oriented and long-term perspective”.
The push to take Rothschild & Co private is the most high-profile move yet by Alexandre de Rothschild, a member of the seventh generation to run the bank, since he succeeded his father David de Rothschild at the helm five years ago.
The younger de Rothschild said in an interview last week that the group had “reached the limit and full potential of the listing”, and that its DNA was “much better suited to being a private company”.
The move has raised some questions over valuation, however. Excluding extra dividends that will be paid as part of the offer and which take the offer price to €48 per share, the price would be €38.6, below where they were trading just before the offer was announced.
To finance the deal, Concordia will at least partly turn to bank loans, and it said on Monday it had commitment letters from two lenders. One of the banks is Natixis, a person familiar with the matter said. Natixis declined to comment.
The industrial investors will ultimately end up with around 5 per cent of Rothschild each, and would be locked into the shares for at least eight years.
Rothschild’s 100 or so partners will double their stake in the business to 10 per cent as part of the buyout, while Concordia and the so-called concert of family shareholders, will have 60 per cent, up from 54.5 per cent now.
Details of the take-private deal were unveiled as Rothschild & Co reported its financial results for 2022, in which overall group revenues grew 1 per cent to €2.96bn.
Full-year revenue in global advisory, its largest division, dropped 4 per cent to €1.84bn, and profits before tax dropped 12 per cent to €372mn. This follows a record year for the global advisory business in 2021, and reflects a wider slump in deal making, as rising interest rates and economic uncertainty brought a period of frenzied activity during the peak of the pandemic to an abrupt close.
“We’re expecting our businesses to continue to perform well but below 2022 levels, linked to a slowdown in mergers and acquisitions in a very uncertain macroeconomic climate,” said Pérol. “It’s always hard to see more than six months ahead in this sector but the first semester will be weaker.”
The slowdown in M&A has pushed investment banks such as Goldman Sachs to cut thousands of jobs and slash bonuses in the wake of plunging profits.
Pérol said that Rothschild & Co would not cut headcount, although the group might recruit less or stop taking on new people, and it had room to adjust variable pay. “We try to avoid a stop-and-go situation, that’s not what we do,” he said.
Rothschild & Co’s roughly €100bn wealth and asset management division increased revenues by a fifth last year to €700mn, and recorded a one-third jump in profits to €154mn. Merchant banking, its smallest business line, increased revenues by 2 per cent, to €406mn, and profit before tax dipped 6.5 per cent to €273mn.