The proposed £45bn merger between Tilney and Smith & Williamson has been delayed due to a combination the coronavirus pandemic and ongoing concerns from the Financial Conduct Authority (FCA) regarding the transaction structure.
In a note to investors on S&W's website published yesterday (15 April), the wealth management firm said it has been working closely with the FCA to develop a revised transaction structure after the regulatory body identified a number of concerns in January of this year.
It added that "significant progress has been made" in discussions, with the firm confirming a "material new equity investment and thus a significant reduction in the external debt levels of the… combined group".
"However, due to the unprecedented circumstances caused by the Covid-19 pandemic and the resultant challenges for regulators, investors and others, the parties' discussions regarding the revised structure have inevitably been delayed," it stated.
"The primary focus of Smith & Williamson, Tilney and Permira at this time is the continued support of our respective clients' needs, as well as the health and safety of our people, whose continued efforts to support their businesses and colleagues are a credit to them and to their organisations."
The merger's original completion date listed as the 16 April this year, but S&W will now confirm whether an agreement on the revised structure of the business has been confirmed "by the end of May 2020".
Separately, the company will update shareholders on the timing and amount of any further distribution to shareholders by the end of May, following an interim pay-out of 15 pence per share on 7 February 2020.
David Cobb and Kevin Stopps, co-chief executives of Smith & Williamson, said: "We continue to believe in the compelling strategic rationale of this merger and are pleased to report that significant progress has been made towards revisions to Tilney's transaction structure that address the points raised by the FCA.
"However, in light of the extraordinary circumstances created by the covid-19 pandemic, the transaction process has inevitably been delayed. If the parties can agree amendments to the transaction structure that the Smith & Williamson board is able to recommend, we will ask our shareholders to vote on whether the revised transaction should go ahead."
It added: "We would like to thank all of our stakeholders for their continued support and efforts in these challenging times and will provide a further update as soon as possible."
The merger, which is expected to be finalised under the name Tilney Smith & Williamson, was agreed on 19 September 2019. Chief executive of Tilney Chris Woodhouse was confirmed to become group chief executive, while Tilney chair, Will Samuel, would maintain his title for the combined group.
This article was first published by Investment Week