Deutsche Bank AG agreed to buy Numis Corp., one of the best-known U.K. boutiques, in an all-cash deal that could reshape the landscape of investment banking in the city of London.
The German lender’s purchase will value Numis at about £410 million (approximately $512 million), a 72 percent premium to Thursday’s close. The deal will take Deutsche Bank from a few dozen bankers focused on U.K. offerings to one of the biggest teams in the city.
After a multiyear restructuring effort, Deutsche Bank has been pushing back into a few more volatile businesses and is taking advantage of a slump in dealmaking to pick up top bankers and now a boutique firm. The bank is trying to be opportunistic while not turning away shareholders who’ve been looking for steadier returns to lift the share price.
“We have been evaluating how to accelerate the growth of our business in the U.K.,” Fabrizio Campelli, who oversees Deutsche Bank’s corporate and investment banking activities, said in a statement. “The combination enables us to realize greater revenue opportunities across our shared client base and to deepen our engagement with U.K. corporates.”
But some analysts voiced skepticism, with JPMorgan Chase & Co.’s Kian Abouhossein and Amit Ranjan saying the “surprise” deal “needs lots of explaining.”
“It does not change the investment story of Deutsche Bank materially considering the size of the acquisition,” they wrote in a note, adding “it is not aligned with what shareholders want to see more of — retail-type stable earnings, more cost focus and capital return.”
RBC analyst Anke Reingen said the deal won’t affect Deutsche Bank’s buyback plans, citing a meeting with chief financial officer James von Moltke. Reingen said the German bank can do two or three similar deals per year within its capital plans.
The transaction, if successful, means Deutsche Bank will be bringing in 344 staff just a day after announcing a plan to cut 800 senior back-office workers as part of cost reductions and will be adding a team of equities traders almost four years after deciding to shutter the entire division.
For Numis, the offer from Deutsche Bank comes after a tough year for City of London firms, with a sharp downturn in capital markets hitting various British brokers hard. Numis said it had seen “very subdued levels of equity issuance and corporate activity” in recent months, as moribund capital markets continued to weigh on revenue.
Numis ranked third in advising on U.K. initial public offerings over the past five years, behind only JPMorgan and Goldman Sachs Group Inc., according to data compiled by Bloomberg. Deutsche Bank ranked 13th. The two banks’ combined deal credit would rank first, though there are likely some overlaps in clients and transactions.
Deutsche Bank chief executive officer Christian Sewing is seeking to boost business with large companies as a way to grow, now that its dominant fixed-income trading business is facing stagnating or even declining revenue. He said that he wants to add to the lender’s advisory capabilities.
The Frankfurt-based lender has managed to draw a line over the past few years under an era of scandals and deep losses and its rising profitability means it can finally afford to make acquisitions, at least smaller ones, without tapping shareholders for fresh cash.
The German lender will pay 350 pence a share, of which 339 pence will be paid out in cash, and the rest in two rounds of interim dividends conditional upon the transaction becoming effective, according to the statement.
The deal is expected to close in the fourth quarter and Deutsche Bank anticipates that the transaction will start being “EPS accretive” in 2024, according to the statement. Deutsche Bank said it intends to co-brand with Numis.
Numis directors plan to unanimously recommend that shareholders vote in favor of the transaction.
