Deutsche Bank has agreed to buy UK broker Numis for £410mn as Germany’s biggest bank bets on a rebound in a London market that has struggled in recent years.
In a surprise deal announced on Friday, Deutsche said it would pay 350p a share for Numis, which advises almost a fifth of companies in the FTSE 350 index on everything from equity raisings to acquisitions.
The purchase comes amid a sharp decline in initial public offerings and equity raisings in London. Numis’s profits slumped 70 per cent last year and the group warned in February that 2023 is likely to be challenging.
“We have been evaluating how to accelerate the growth of our business in the UK and Numis represents a compelling strategic fit,” said Fabrizio Campelli, head of corporate and investment bank at Deutsche.
As part of the deal, Deutsche will combine its existing UK and Ireland corporate finance businesses with Numis, which has 166 corporate clients in the UK.
The price Deutsche is paying marks a 72 per cent premium to Numis’s closing share price on Thursday. Numis shares soared almost 70 per cent in early trading.
Alongside 339p in cash, Deutsche will pay Numis shareholders an interim dividend of 6p and an additional interim dividend of 5p.
Luke Savage, chair of Numis, said the board is recommending the offer which “represents an attractive proposition for Numis shareholders, but also provides a significant opportunity for clients, employees and wider stakeholders through this highly complementary combination.”
UK brokers have been under pressure over the past five years from the impact of Mifid II in Europe, which split out payments for research from trading commissions, hitting revenues. The recent flight of capital from London to New York’s stock exchanges adds to the challenges for brokers seeking to attract companies to the UK market.
The broker’s co-chief executives Alex Ham and Ross Mitchinson will stay in their roles and will lead the enlarged business. Deutsche said it had no plans to change the locations or redeploy Numis’s assets.
Deutsche plans to merge most of its UK and Ireland corporate finance team of 35 people into the combined business. Numis, founded in 1989, has 332 employees within the UK and Ireland. Deutsche added that it plans to co-brand with Numis for the relevant activities.
The transaction is expected to complete in the fourth quarter of this year. Deutsche said it should boost earnings per share from next year.