Rothschild family privatizes Paris-listed investment bank

In a show of confidence that solidifies the Rothschild family’s grip on its Paris-listed investment bank, the financial dynasty said on Monday it plans to make Rothschild & Co. private.

Rothschild & Co., best known for its deals arm that once employed French President Emmanuel Macron, has expanded over the past three decades from simple M&A advice to asset management, private equity and debt financing.

This development, formerly led by 80-year-old David de Rothschild and now his son Alexander, means the family doesn’t need as much access to capital in the public stock markets, family holding company Concordia said in a statement.

“In addition, each of the businesses is better valued based on their long-term results rather than short-term earnings,” Concordia added.

“This makes private ownership of the Group more appropriate than a public listing.”

The announcement did not come as a shock to some analysts.

“They are getting big in the private equity business and want to make the most of it for themselves,” the analyst said, adding that stock trading volumes were low.

“Given the rise in interest rates, it’s better to do it now and not later if they need bank financing.”

During a period of slowdown in M&A activity and lower advisory fees, the privatization of the family firm will protect its operations from day-to-day scrutiny and pressure from the markets.

Deal proceeds at the top five US banks fell 53% in the fourth quarter from last year, according to data compiled by Reuters.

In Europe, investment banking revenues for Deutsche Bank and UBS Group fell by 71% and 52%, respectively, in the last three months of 2022.

Under the current buyback plan, Concordia, Rothschild & Co.’s largest shareholder, is ready to submit a tender offer to buy the investment bank’s shares at €48 each, Rothschild said in a statement. Concordia is the #1 family holding company with a 38% share.

The price represents a 19% premium over the closing price of Rothschild & Co. shares. on Friday in the amount of 40.25 euros and a premium of 34% to the weighted average share price for the last four months.

Rothschild shares rose 16.5% in morning trading to 46.9 euros per share, valuing the group at 3.6 billion euros ($3.88 billion).

The private ownership plan will be presented to shareholders on May 25, the investment bank said, adding that an exceptional dividend of €8 per share would be paid if Concordia followed suit with its buyout offer.

According to the bank’s website, at the end of last year the Rothschild family owned about 55% of the bank’s shares and 69% of exercised voting rights.

According to the latest earnings report, Rothschild & Co. amounted to 2.2 billion euros in the first nine months of 2022, with profits across all business lines from transaction advice to wealth and asset management.

However, the group warned that “a more challenging year” lies ahead, with lower transaction activity and a reduction in assets under management weighing on fee and commission income.

Rothschild & Co. said it will provide more information on the private property plan on Feb. 13 when it reports results for the full year.

Rothschild & Co. was first registered in Paris under the name Paris-Orleans in 1838. Registered financial advisory competitors include Lazard, Perella Weinberg Partners and Evercore.