Julius Baer: moving up or backing up?
The SFr5.6bn (?3.6bn) acquisition by bank Julius Baer of UBS’s wealth management subsidiaries Ehinger & Armand von Ernst, Ferrier Lullin & Cie, Banca di Lugano and GAM Holding has been heralded as the most significant private banking deal since UBS and SBC joined forces in 1998. Potentially, it signals a shifting of gears in the market – more so than the Lombard Odier Darier Hentsche deal of three years back.
With the integration of these four entities, known collectively as the SBC Wealth Management (SBC WM) division, Julius Baer will become the largest Swiss wealth manager focused exclusively on private banking and asset management as its two core operating divisions. The bank will have SFr270bn under management, of which SFr113bn will be private banking assets, and a global headcount of around 3500 before job cuts.
Raymond Baer, who will continue as chairman of the group, announced that the deal paves the way for sustainable independence of the Julius Baer group. The deal will also give Julius Baer critical mass to expand in onshore Europe and the growth markets of Asia, the Middle East, Central and Eastern Europe and Latin America for the first time.
However, with UBS holding a 21.5 per cent stake in the new entity, on an 18-month lock-up, plus UBS executives taking senior positions in the enlarged Julius Baer, it is hard to see the deal as a pure transfer of assets. Indeed, there is significant evidence of a roll up or reverse takeover in the deal structure as announced.
SBC WM has long been viewed as UBS’s wealth management ‘play’. When the unit was formed in 2003 the stated mandate was to play a role in the consolidation of the Swiss private banking industry maximising the value to UBS from the subsidiary banks. Some say this was in fact the self-appointed mandate of Hans de Gier, one time chief executive of Warburg Dillon Read, who was made chairman of the SBC Wealth Management group, and who took a personal interest in realising top dollar for the SBC WM group.
Mr de Gier’s dream team sidekick in the SBC WM corporate finance venture was Georges Gagnebin, former head of UBS Wealth Management and now vice-chair of SBC Wealth Management. Together Mr de Gier and Mr Gagnebin have been responsible for the restructuring and now sale of the unit to Julius Baer at a price of 4.7 per cent of assets, well above the market average of 2-3 per cent. Moreover the deal monetises past achievements for the duo, and the bank, as well as set the stage for an even bigger venture.
In the new Julius Baer structure, Mr de Gier has been named as chief executive and president of Julius Baer – ousting Alex Widmer, himself the former private banking chief from Credit Suisse, to the position of head of private banking. Meanwhile, Mr Gagnebin is due for election to the board of Julius Baer at the next shareholder meeting in 2006.
And, in an almost clean sweep of management, David Solo, the former O’Connor partner, chief operating officer of UBS Warburg and recently appointed chief executive of GAM Holding, will head the asset management division at Julius Baer. Mr Solo is widely viewed a rising jewel in the UBS crown.
With this particular management team in place, shown in more detail overleaf, one could well expect to see UBS pushing for top dollar from its 21.5 per cent holding over a two- to three-year time frame. It is worth noting the deal also effectively blocks Credit Suisse’s path to the bank which no doubt pleases UBS even more.
Cath Tillotson is head of research at wealth management strategy think tank Scorpio Partnership
