France’s best-known independent investment bank is set to reverse out of an ownership structure copied by Goldman Sachs when it floated in New York in 1999. The Rothschild family plans to buy out Paris-quoted Rothschild & Co. A partnership would take full control.
Everything we do may be deemed an implicit criticism of those who do otherwise. But unlike Goldman’s former partners, the branch of the famous European banking dynasty led by David de Rothschild has no wish to tap external capital or pay bankers in quoted shares. Instead, it wants to tighten control.
A low-profile business would become more so. Discretion is in the Rothschilds’ DNA. Consensus has sometimes been less evident. The buyout would value the bank at €3.7bn and reduce the dispersion of voting power at a bank now into its seventh generation of family leadership under David’s son Alexandre.
Expect a renewed push into wealth management and private assets, now accounting for half the bank’s activity. Chatter may recur concerning a combination with Edmond de Rothschild, a separate Swiss private bank.
More immediately, the buyout of Rothschild & Co would remove the blot on the escutcheon represented by a dismal share rating. The stock has been trading close to historic highs. But low liquidity, local one-of-a-kind status and a weak foothold in the US translate into a forward price earning ratio of just 5.5 times. That compares with 11 to 12 times for New York-listed Lazard, Evercore and Goldman, according to S&P Capital IQ.
The family holding company is offering €48 per share inclusive of a €1.4 dividend and €8 special payout. The premium to the three-month share price would be a healthy 30 per cent ex-dividend. Family vehicle Concordia has 47.5 per cent of the voting rights, with a further fifth held by aligned relatives.
That rules out competing bids, if not hedge fund bumpitrage. As experts in valuation, Rothschild bankers must be acutely aware that Concordia’s bid price is simultaneously high and low.
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