France’s best-known independent investment bank is set to reverse the ownership structure copied by Goldman Sachs when it floated in New York in 1999. The Rothschild family plans to buy Paris-quoted Rothschild & Co.
Everything we do can be perceived as an implicit criticism of someone who does something else. But unlike Goldman’s former partner, the branch of the famous European banking dynasty led by David de Rothschild does not want to tap external capital or pay bankers in quoted shares. Instead, they want to tighten their controls.
A low-profile business will be more. Discretion is in the Rothschilds’ DNA. Consensus is sometimes less clear. The purchase will value the bank at €3.7bn and reduce the spread of voting power in the bank now in the seventh generation of family leadership under his son David Alexandre.
Expect a renewed push into wealth management and personal assets, now accounting for half of the bank’s activities. Talks could resurface about a combination with Edmond de Rothschild, a separate Swiss private bank.
More quickly, the purchase of Rothschild & Co will remove the blot on the escutcheon represented by the dismal stock rating. Stocks have been trading near historic highs. But low liquidity, local one-of-a-kind status and a weak foothold in the US translate to a forward price-earnings 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 including a €1.4 dividend and a special payment of €8. The premium to the three-month share price would be a healthy 30 percent ex-dividend. The Concordia family vehicle has 47.5 percent of the voting rights, with five times more held by the aligned siblings.
That eliminates competing offers, if not bumpitrage hedge funds. As an expert in the value, Rothschild banker must be acutely aware that Concordia’s bid price is both high and low.
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