Chris Macdonald, chief executive, Brooks Macdonald Group

Brooks Macdonald signs option agreement to acquire Levitas

Brooks Macdonald Group has signed a put and call option agreement with the shareholders of Levitas Investment Management Services for the sale and purchase of the entire issued share capital of Levitas. 

Levitas is the sponsor of two funds known as TM Levitas A and TM Levitas B. Brooks Macdonald Asset Management (BMAM) is the investment adviser to the funds.
 
The funds were launched in July 2012 and aggregate assets under management (AUM) have increased to GBP60.52m as at 30 November 2013. The AUM is expected to increase to c. GBP150m by 30 June 2014 and to c. GBP250m by 30 June 2015.
 
The Levitas proposition uses a blend of the two funds and a separate cash fund to match investments to a client’s specific risk rating, thus simplifying the investment and rebalancing processes while keeping down costs. As a client’s risk rating increases, the Levitas proposition shifts from a low-risk mix of the cash fund and the more defensive TM Levitas B fund to a more high-risk blend introducing the more adventurous TM Levitas A fund.
 
The purchase of Levitas will enable Brooks Macdonald Group to extend its investment proposition while further enhancing its ability to meet a range of client attitudes to risk.
 
The acquisition also complements the group’s growth strategy by providing a profitable extension to BMAM’s existing investment approach and product proposition. The group expects Levitas to achieve significant growth over the next five years and be earnings enhancing in the next financial year.
 
In the 18-month accounting period ending 31 December 2012, Levitas reported a profit before tax of GBP6,713 on revenues of GBP52,478.
 
The group will incur costs of c. GBP150,000 in the year ending June 2014 to complete the transaction.
 
The consideration payable by the group, upon exercise of either of the options and completion of the option agreement, will be based on three per cent of Levitas’ AUM calculated at agreed milestones up to 01 November 2018.  The maximum consideration payable by the group will be GBP24m, subject to reduction if the AUM fails to meet the agreed targets. Payment of the consideration will be made by the group in a series of instalments, with the final payment date being on or around 8 November 2020. The consideration is payable by the group in cash from its existing resources and future retained earnings.
 
The call option may be exercised by the group during the period 18 July 2014 to 7 August 2014 and the put option may be exercised by the shareholders of Levitas during the period 8 August 2014 to 28 August 2014. If neither option is exercised before the expiry of the relevant option period, the options will lapse and the option agreement will terminate.
 
Craig Knight, a shareholder and director of Levitas, will remain a director of Levitas post the acquisition, and Derek Miles, also a shareholder and director of Levitas, will continue to support the group on a consultancy basis.
 
Chris Macdonald (pictured), chief executive of the group, says: “We are very excited about the opportunity of working with Levitas. We already have the privilege of managing these funds and we believe that the potential for growth in the future is significant.”
 
Knight says: “Having worked with Brooks Macdonald on the launch of our funds, we are delighted to transition them to Brooks’ ownership and are confident that this development will be in the best interests of Levitas, our shareholders and the investors in our funds.”

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