JTC PLC (LSE:JTC) announced the acquisition of SALI Fund Management, LLC and SALI GP Holdings for up to US$236mln in a deal that “significantly” strengthens the group's platform in the US.
The acquisition will be partly funded from a placing carried out yesterday of 10.99mln new JTC shares at 718p each, which raised £78.9mln.
JTC, a global provider of fund, corporate and private client services, said the acquisition is expected to deliver mid-single digit EPS accretion in 2022.
It said SALI will provide it with “meaningful additional scale” in the US fund services market and is complementary to its existing US footprint. Following the acquisition, the US will be JTC’s second-largest jurisdiction with over US$35mln of turnover and more than 120 staff.
JTC described SALI as a pioneer of the Insurance Dedicated Fund (IDF) market. IDFs are investment vehicles that enable investment managers to provide high net worth individuals, family offices and institutions with a tax efficient vehicle to invest the permanent capital allocated to life insurance policies into alternative assets.
“SALI has an exceptional financial profile, with strong revenue growth coupled with high margins and cash conversion,” JTC said.
The consideration for SALI comprises an initial sum of US $204.5mln, which will be settled by a combination of US$192.2mln in cash and up to US$12.3mln in new JTC shares.
A further sum of up to US$31.5mln is payable in cash and JTC shares on the achievement of performance targets for the two-year period post completion.
The acquisition will be funded from the group's existing cash reserves, debt facilities and the proceeds of the £78.9mln placing.
Liontrust Asset Management (LSE:LIO) PLC, a substantial shareholder in JTC, subscribed for 800,000 placing shares with a value of approximately £5.7mln.
"We are delighted with the result of this placing and grateful for the support of investors, in particular our existing shareholders. The capital raised will support the acquisition of SALI Fund Services, a high quality business in the important US market and will also ensure that we maintain a strong balance sheet and significant firepower to continue executing on our disciplined inorganic growth strategy as part of our Galaxy Era business plan, in which we aim to double the size of the group," said JTC chief executive officer Nigel Le Quesne.
Within the funding of the acquisition of SALI, JTC has also refinanced its underlying debt facilities to allow it carry out further mergers and acquisitions, including £225mln revolving credit and term loan facilities that will replace its prior £150mln debt facilities.
SALI reported revenue of £7.9mln and adjusted EBITDA of £4mln in 2020 and its guidance for 2021 is £11mln of annualised net revenue, translating to £6.6m EBITDA on a run rate basis.
Post-completion of the acquisition and placing, JTC anticipates leverage to be 2.2x net debt/underlying EBITDA. This will reduce significantly in 2022, providing headroom for additional merger and acquisition activity, it added, noting that medium term guidance is up to 2.0x.
"SALI is a business of exceptional quality and a clear leader in the growing IDF market. Their operations are highly complementary to our existing US footprint and their deep expertise will be a fantastic addition to our Group capabilities,” said Le Quesne.
Thomas Nieman, CEO of SALI, commented: “SALI's customers include many of the largest and most innovative insurance companies and alternative investment managers around the globe. We look forward to continuing to enhance our service offering for these clients through JTC's global reach and commitment to customer service."
JTC’s chief financial officer Martin Fotheringham bought 389,972 shares in the placing and now holds 0.5% of the company, while chief operating officer Wendy Holly acquired 5,571 shares, lifting her stake to 0.3%. The JTC EBT acquired 69,637 placing shares and now holds 2% of the company.
Shares jumped 5.29% to 756p in early trade.