The deal comes eight years after Schroders bought into the bank. It gives it full control of a firm with 1,200 employees and pre-tax profits last year of dollars 35m. Most of the shares are to be bought from Wertheim management, with the balance from institutional investors.
Nick MacAndrew, Schroders finance director, said: 'They feel they would like the support of a larger, well-capitalised, more international organisation. The market is moving more internationally and they have a largely domestic business.' He said there were also areas in which Wertheim could support Schroders, which has little US business.
Schroders made pounds 196m before tax last year, a return on equity of 32 per cent compared with Wertheim's 20 per cent. But Mr MacAndrew denied Schroders was unhappy with Wertheim's performance under joint ownership.
He said the businesses were different - for example, Wertheim has a big equity research and trading operation and Schroders is more heavily into fund management, which provides higher returns on capital.
The deal values the New York bank at dollars 310m, after allowing for the debt Schroder is taking on, compared with the dollars 175m at which it was valued in 1986. Schroders' total investment since 1986 will rise to dollars 257m.
Wertheim Schroder is viewed on Wall Street as a solid institution with a good record, which has none the less always remained in the second tier of investment banks, well behind blue-chip names such as Goldman Sachs and Morgan Stanley. 'They have always had good equity research,' Perrin Long, a brokerage industry analyst at First Michigan Corp, said.
Jim Harmon, who will stay on as chairman of Werthheim Schroder following the deal, said it made sense to add Schroders' worldwide abilities to originate deals to the distribution powers of Wertheim Schroder in the US.
He added it was difficult for foreign firms to make their presence felt in the US. 'It is very hard to compete with a domestic investment banking firm,' he said.
Taking full control of Wertheim Schroder is expected to be a prelude to a more energetic push by Schroders into the US.
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