Newton Management Ltd., one of the United Kingdom's most successful money managers, has agreed tentatively to merge its business with the Royal Bank of Scotland's money management unit, Capital House Investment Management Ltd.
The merged entity will manage more than 8 billion ($12.6 billion) in assets. The motive for London-based Newton to merge was to diversify its business away from pension funds, which now account for 80% of its 5 million in assets under management. Capital House, Edinburgh, runs some 3 billion in assets, of which about 1 billion represents the bank's own pension fund; the rest is managed on behalf of private clients.
The merged entity, which will retain the Newton name, will run unit trusts marketed through the bank's retail branches. The merger also will give Newton access to offshore funds for private clients.
In addition, employee ownership will be broadened under the agreement. Stewart Newton, the firm's founder and chief executive, will remain the single largest shareholder, although he no longer will have a majority stake in the firm.
Under the agreement in principle, The Royal Bank of Scotland, Edinburgh, will swap all of its shares in Capital House for an allocation of new shares in Newton. The bank also will purchase existing Newton shares for 25 million. In total, the bank will have a 33% holding in the merged unit, with the remainder held by Newton management and staff.
No decisions have been made yet with regard to personnel, although some job losses are likely, a spokesman said.