TIDMJTC
RNS Number : 7490C
JTC PLC
14 June 2023
THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR RELEASE,
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THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN
OFFER OF SECURITIES IN ANY JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
14 June 2023
For immediate release
JTC PLC
(the "Company" and together with its subsidiaries "JTC" or the
"Group")
Acquisition of South Dakota Trust Company
Establishes JTC as the leading independent provider of
administration services to the US personal trust sector
JTC, the global provider of fund, corporate and private client
services, is pleased to announce that it has entered into a
definitive agreement to acquire TC3 Group Holdings LLC, trading as
South Dakota Trust Company ("SDTC") , the leading independent
provider of administration services to the US personal trust
sector, for a maximum consideration of $270 million (the
"Acquisition").
The total consideration of $270 million will be satisfied as
follows:
-- $200 million initial consideration comprising $147 million in
cash and up to a maximum of $53 million in new JTC ordinary shares
("Ordinary Shares"); and
-- A further earn-out of up to $70 million will be payable in
cash and JTC Ordinary Shares on the achievement of specific revenue
performance targets for the two-year period ending 31 December
2025
The Acquisition is subject to customary US merger control as
well as regulatory approval in South Dakota (SD) and is expected to
complete before the end of August 2023. The Acquisition will be
funded from the Group's existing cash reserves, debt facilities and
the proceeds of a proposed placing of new Ordinary Shares to raise
gross proceeds of c.GBP62 million (the "Placing"), representing
approximately 6% of JTC's current issued share capital.
The Placing is being conducted through an accelerated
bookbuilding process which will be launched immediately following
the release of the Placing Announcement. Joh. Berenberg, Gossler
& Co. KG ("Berenberg") and Numis Securities Limited ("Numis")
are acting as the Company's joint bookrunners (Berenberg and Numis
together, the "Joint Bookrunners") in connection with the
Placing.
Acquisition Highlights:
-- Acquisition of SDTC, the leading independent provider of
administration services to the US personal trust sector
-- SDTC provides access to a sticky client base of c.1,700 high
net worth and ultra-high net worth clients with a large
intermediary network
-- SDTC has a compelling financial profile with a 22-year track
record of consistent growth, high margins and strong cash
conversion
-- Fixed annual recurring fees and very low client churn (c.3%
per annum) provide excellent revenue visibility and predictability,
with 98.3% client revenue retention
-- Establishes JTC as the leading independent provider of
administration services (combined $152 billion Assets under
Administration ("AuA") to the US personal trust market
-- Significantly strengthens JTC's US business, creating a
platform for growth as the Group prepares to start its next
multi-year business plan, the Cosmos era
-- SDTC has been known to JTC since 2016 and both share strong
cultural alignment with a focus on service excellence
-- Acquisition is accretive to Group organic growth and margins,
and is expected to deliver mid-single digit EPS accretion to Group
EPS from FY24 based on the proposed funding structure
Information on SDTC and the US Personal Trust Market
SDTC, founded in 2002 and headquartered in Sioux Falls, SD, is
the leading independent provider of administration services to the
US personal trust sector, providing bespoke trust administration
services to a highly attractive and sticky client base. SDTC has a
uniquely experienced management team leading over 100 full time
employees and administering in excess of $135 billion of assets.
SDTC's objective is to provide flexible, individualised,
service-oriented, cost-effective trust administration and SDTC is
able to work with most types of non-financial assets (both onshore
and offshore).
The US is home to the most ultra-high net worth individuals of
any country in the world and it is estimated JTC's core addressable
market captures c.$1.2 trillion of AuA, which has grown at a
compound annual growth rate ("CAGR") of 9.4% from 2018 to 2022 and
is forecast to grow at a CAGR of 8.2% from 2023E - 2028E (1) . As
wealth concentration grows and given the current onerous federal
transfer tax system, trust structures are imperative in preserving
multi-generational wealth and therefore the Board believes that
demand for such trust services will continue to increase,
particularly as the ownership of alternative asset classes and
regulatory sophistication increases.
South Dakota is the largest and most attractive jurisdiction
within the US with $458 billion of AuA, supported by best-in-class
trust, privacy, tax and asset protection laws alongside a
cost-efficient and dedicated workforce, a strong economy and
supportive State government.
Strategic Rationale
Establishes JTC as the leading independent provider of
administration services to the US personal trust sector
-- Growth market : The US is home to the most ultra-high net
worth individuals of any country in the world and it is estimated
JTC's core addressable market captures c.$1.2 trillion of AuA,
which has grown at a compound annual growth rate ("CAGR") of 9.4%
from 2018 to 2022 and is forecast to grow at a CAGR of 8.2% from
2023E - 2028E [1]
-- Market-leader : SDTC is a market leader in the highly
fragmented State chartered non-depository trust market
-- Stable client base : SDTC provides access to c.1,700 high net
worth and ultra-high net worth family clients, including more than
100 billionaires and 350 centimillionaires, based on a large
intermediary network which delivers predictable revenues
-- Wider growth opportunities : with increased scale and JTC's
additional service offering, such as its Private Office which
provides corporate, accounting, regulatory reporting and family
governance services, the acquisition will provide opportunities to
increase share of wallet in the wider private client services
market in the US
Compelling financial profile that supports long-term value
creation within the JTC Group
-- Strong growth : SDTC has a 22-year track record of consistent
growth, with revenues increasing at a CAGR of 33% from 2002-2022
and steadily increasing its market share
-- High margins : SDTC's EBITDA margin was 32% in both 2021 and
2022 and is expected to increase to 40% for 2023 on a run rate
basis
-- Recurring fixed fee revenues : Over 98% of total revenue is
based on recurring fixed annual fees, and therefore not exposed to
volatility in AuA values, and the unexpired lifetime value of the
book of current clients is c.$530 million [2]
-- Strong cultural alignment : both companies are focused on
service excellence and the JTC and SDTC teams have known each other
for over seven years
Significantly strengthens and scales JTC's US platform
-- Delivers on JTC's US growth strategy : SDTC builds on JTC's
track record of acquisitions in the US, and the Group's
complementary US Private Client Services operations, which were
established in 2013, already includes a material presence in South
Dakota and which were further strengthened with the acquisition in
2022 of New York Private Trust Company, a Delaware-chartered
non-deposit trust company
-- Increases scale in the fast growing highly profitable US
market: Post completion of the Acquisition, JTC will have a total
of 15 US offices, including both Private Client Services and
Institutional Client Services, spanning the East to the West coast,
with over 300 employees, enabling JTC to further develop and expand
its personal trust services offering in a large and growing
market
-- Diversifies revenue and earnings: Further increases JTC's
overall US footprint, with the US expected to represent c.30% of
Group revenue in the short term, creating a platform for growth as
the Group prepares to start its next multi-year business plan, the
Cosmos era
SDTC financial performance
SDTC has a strong and highly complementary financial profile to
JTC. For the year ended 31 December 2022, SDTC generated revenue of
$31.8m (GBP25.2m [3] ) and adjusted EBITDA of $10.0m (GBP7.9m (3)
). For the year ending 31 December 2023, SDTC management
expectations are for revenue of $35.4m and EBITDA of $14.3m on a
run-rate basis [4] . The gross assets of the subject of the
transaction are $20.9m as at 31 December 2022.
Financial benefits of the transaction
SDTC's organic growth, strong margins and cash conversion will
significantly bolster the overall profile of JTC, and in particular
JTC's US platform. The Acquisition will be accretive to Group
organic growth and margins and is expected to deliver mid-single
digit EPS accretion to Group EPS from FY24 based on the proposed
funding structure. Post completion of the Acquisition and Placing,
JTC anticipates leverage to be below 2.0x net debt / underlying
EBITDA for the year ended 31 December 2023, in line with JTC's
stated guidance.
Nigel Le Quesne, CEO of JTC, said:
"SDTC is a great addition to the JTC Group. It is a
market-leader in the fast-growing personal trust market in the US,
which in turn is the largest in the world. It has a highly
committed, service-focused team with deep client relationships, an
outstanding track record of profitability and growth, and is hugely
complementary to our existing US operations, particularly our
existing South Dakota business and building on our acquisition of
NYPTC last year. Not only does it bring us greater scale in the US,
it also provides significant opportunities to offer our wider
private client services to their high net worth and ultra-high net
worth family clients. The acquisition also very much delivers on
our previously announced strategy to grow a market leading US
personal trust business. We are delighted to welcome SDTC's valued
colleagues, clients and partners and very much look forward to the
significant opportunities ahead of us in this exciting growth
market".
Al W. King III, Co-Founder and Co-Chief Executive Officer of
SDTC, said:
"We are delighted to join JTC. We have an enormous amount in
common including our commitment to our clients, our culture and our
professional expertise. We know the JTC team well having worked
with them for over seven years, and see significant opportunities
to expand our combined offering to clients and their advisors, so
that we can meet more of their needs in this fast growing private
client market".
Pierce H. McDowell III , Co-Founder and Co-Chief Executive
Officer of SDTC, said:
"Combining SDTC, the leading and fastest-growing independent
trust administration business in the US, with JTC, a highly
successful global group, with a fast-developing US business,
provides enormous opportunities for the benefit of our valued
clients, employees and partners. As a team of over 100 people,
including over 60 dedicated trust officers, we very much look
forward to joining our colleagues at JTC and realizing the many
opportunities that lie ahead".
Enquiries
JTC PLC +44 (0) 1534 700 000
Nigel Le Quesne, Chief Executive
Officer
Martin Fotheringham, Chief Financial
Officer
David Vieira, Chief Communications
Officer
Camarco
Geoffrey Pelham-Lane +44 (0) 7733 124 226
Sam Morris +44 (0) 7796 827 008
About JTC
JTC is a publicly listed, global professional services business
with deep expertise in fund, corporate and private client services.
Every JTC person is an owner of the business and this fundamental
part of our culture aligns us with the best interests of all our
stakeholders. Our purpose is to maximize potential and our success
is built on service excellence, long-term relationships and
technology capabilities that drive efficiency and add value.
http://www.jtcgroup.com/
Important Notice
The person arranging release of this announcement on behalf of
JTC is Miranda Lansdowne, Company Secretary.
The release, publication or distribution of this announcement in
jurisdictions other than the United Kingdom may be restricted by
law and therefore any persons who are subject to the laws of any
other jurisdiction should inform themselves about, and observe, any
applicable requirements. This announcement has been prepared for
the purposes of complying with the Listing Rules and the UK Market
Abuse Regulation and the information disclosed may not be the same
as that which would have been prepared in accordance with the laws
and regulation of any jurisdiction outside of England.
The securities referred to herein have not been and will not be
registered under the U.S. Securities Act of 1933, as amended, or
any U.S. state securities laws and may not be offered or sold in
the United States absent registration or an exemption from
registration thereunder. JTC PLC does not intend to register any of
the securities in the United States or to conduct a public offering
of the securities in the United States.
This announcement contains forward looking statements. No
forward-looking statement is a guarantee of future performance and
actual results or performance or other financial condition could
differ materially from those contained in the forward-looking
statements. These forward-looking statements can be identified by
the fact they do not relate only to historical or current facts.
They may contain words such as "may", "will", "seek", "continue",
"aim", "anticipate", "target", "projected", "expect", "estimate",
"intend", "plan", "goal", "believe", "achieve" or other words with
similar meaning. By their nature forward looking statements involve
risk and uncertainty because they relate to future events and
circumstances. A number of these influences and factors are outside
of the Company's control. As a result, actual results may differ
materially from the plans, goals and expectations contained in this
announcement. No statement in this announcement is intended to be,
nor may it be construed as, a profit forecast or be relied upon as
a guide to future performance. Any forward-looking statements made
in this announcement speak only as of the date they are made.
Except as required by the FCA or any applicable law or regulation,
the Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained in this announcement.
[1] Cerulli Associates
[2] Unexpired lifetime revenue value defined as (1/(annual
client attrition * 2022 revenue)) / 2
[3] GBP:USD exchange rate of 1.2612; Source: Bloomberg (13 June
2023)
[4] Revenue run-rate based on annualisation of February 2023
fixed fees from private trusts and annualisation of private trust
company / all other fees for the six month period ending February
2023; operating expense run-rate based on annualisation of expenses
for the three month period ending February 2023
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ACQGPUMPQUPWGAC
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