Offer for Nucleus Financial Group

On 9 February 2021, an announcement was made to the stock market by James Hay Holdings Limited regarding an offer to acquire Nucleus. James Hay Holdings is owned by a private equity firm called Epiris.

Our intention and the high-level plan is to merge the products and operations of the two companies over time to create a leading financial planning and retirement-focused adviser business with over £45bn of AUA. This combination will enable greater investment in technology, products and service to meet the evolving needs of you and your clients.

There are a number of steps to be taken before the acquisition can be completed, including shareholder, legal and regulatory approval and at this stage, we believe these approvals will extend into Q2 2021 to be fully satisfied. While it is the intention of both parties to proceed on this basis, it would be sensible to caveat that nothing is certain until everything is complete.

We made a commitment that the team remains dedicated to growing the business by delivering a brilliant online product backed by a high touch, offline service and that commitment remains true going into this acquisition. James Hay has expressed great admiration for the business and the Nucleus team and is keen to invest further to ensure the combined group can compete successfully at scale. It is worth noting that, James Hay today has an entirely new and highly experienced management team backed by new owners committed to building a leading business over the coming years.

We’ve come a long way together over the last, almost 15 years. A lot of ups and downs on the way as we’ve grown into the £17.4bn firm we are today, none of which would have been possible without your enduring support. We continue to value that greatly during this period. Becoming part of this enlarged group gives us a key role in a much bigger story where we can create a leading independent platform of scale. We look forward to getting to know our new colleagues and mapping out the steps toward moulding a group culture that is centred on doing the right thing and building a market-defining product that really delivers for you and your clients.

A material point that won’t have escaped the notice of those who read the announcement is that James Hay has recently signed an agreement with FNZ for administration and technology services. We’ll be working closely with James Hay Holdings to undertake a detailed evaluation of our current technology arrangements to establish the best way forward for the group and for our users. We can’t speculate on the outcome of this review, but what we can say is that any decision won’t be taken for some time yet and that any changes that are agreed will be implemented in the medium-term rather than the short-term and in a measured and controlled way.

In the meantime, James Hay will commence the process of migrating their assets currently under administration onto a new asset management platform which will be configured and administered by FNZ. Subject to the outcome of this evaluation, the medium-term intention is to optimise and align the target operating model of the combined group around Nucleus’ front-end user experience with continued investment into Nucleus’ front-end capabilities, with underlying platform administration services provided by FNZ.

There will be no change to the Nucleus brand, products or the people servicing you in the near term. There will inevitably be longer-term changes as the operations are merged over time, but we are committed to continuing to provide high levels of support to you and your clients. On that note, it is business as usual at the moment, and we are fully prepared to support you during the busiest period of the year with the tax year-end approaching. Please be assured that nothing changes in terms of your clients’ regulatory protections, and we will do nothing during this process that puts that at risk.

As we’re still going through a legal process, there will be nothing further that we’ll be able to share with you until the legal machinations are complete but as and when we’re able to, we’ll keep you fully informed. Our intention is to let your clients know of the proposed change of ownership, and we will share this with you in due course and advise of timescales. In the meantime, we've pulled together a list of FAQs which we hope will answer some of your questions but if you have any other questions or would like to speak to someone, please don't hesitate to get in touch with your dedicated contact or our client relations team.

FAQs

1 Acquisition and process

1.1 What has been announced?

It has been announced that we have now received a formal offer for the company. This offer has been accepted by Sanlam (our majority shareholder) and is deemed, by our board, to be a fair and reasonable offer for the company and as such, recommendable to other shareholders. The offer is from James Hay Holdings, a company in the James Hay Group which is backed by a private equity firm called Epiris.

1.2 What does this acquisition mean?

The announcement means when the deal completes, (subject to shareholder, regulator and court approval), Nucleus will delist from the stockmarket and become a part of the James Hay group. James Hay intends to merge the products and operations of James Hay and Nucleus over the medium term with the intention of creating a leading financial planning and retirement-focused adviser platform.

Provided the offer is supported by shareholders and passes through various legal and regulatory processes, we will become a critical component in a much bigger story – a £45bn AUA business that will be substantially backed to become a leading independent adviser platform over the next few years, an ambition we’ve been pursuing ourselves since 2006, but which this deal should accelerate us towards.

1.3 Where does FNZ fit in?

Separate to this deal, James Hay has signed an agreement with FNZ for administration and technology services.

They plan to start the process of re-platforming from their proprietary technology onto FNZ in the coming weeks. Once the deal has been completed, we’ll be working closely with James Hay to undertake a detailed evaluation of the target operating model and the path to that point (including consideration of our current arrangements with Bravura) to establish the best way forward for our users, customers, people and the combined group.

Subject to the outcome of this evaluation, the medium-term intention is to optimise and align the operating model of the combined group around Nucleus’ front-end user experience with continued investment into Nucleus’ front-end capabilities. It is currently envisaged that some platform and operational services for the combined group will be provided by FNZ following a measured and controlled migration to ensure continuity for clients.

We’re unable to speculate on whether the outcome of the review will be in line with the above, but what we can say is that any decision won’t be taken for some time yet. We’re a few months away from the acquisition completing and then the review process will take up to three months so we’re unlikely to know the outcome of that until at least the summer.

Any changes that are agreed will be implemented in the medium-term rather than the short-term.

1.4 What is the process from here?

There are a number of steps to be taken before the acquisition can be completed including court approval, shareholder approval and FCA approval.

1.5 What is the timeline from here?

At this stage we believe the approvals process is likely to take up to three to four months to fully resolve but could be significantly longer. And of course, nothing is certain until everything is complete.

1.6 What can I expect to happen now/what does it mean in the immediate term for our business?

There’s no immediate change to our business so we'll carry on with business as usual at the moment. We have a very busy tax year-end period ahead of us and our focus will be on supporting you and your clients through this.

While the legal process continues we’ll probably be unable to give any further details regarding the deal and won’t be able to communicate anything further beyond us achieving each of the approval milestones noted above.

1.7 What involvement have the executive had to date?

Up until this point the executive team has mainly been involved in the due diligence process, which involves providing requested information about Nucleus to entities connected to the bids.

1.8 Is £145m a fair price for Nucleus?

The financial terms of the offer by James Hay have been deemed fair and reasonable by the board and as result, the Nucleus directors have recommended unanimously that the Scheme Shareholders vote in favour of the Scheme at the Nucleus Court Meeting.

1.9 Who are James Hay?

James Hay was founded in 1979 as a specialist platform for retirement wealth planning, providing services to financial advisers and their clients, enabling them to administer pensions, savings and investments in a cost and tax efficient way.

James Hay was one of the first self-invested personal pension (SIPP) providers in the UK and is part of the IFG Group which manages £27.6 billion of pension and savings assets on behalf of over 58,000 clients.

James Hay was purchased by Epiris in 2019 and has an entirely new and highly experienced management team led by CEO Richard Rowney which is committed to building a leading, high-quality business over the coming years.

1.10 Who is Epiris?

Epiris is a private equity firm which invests in UK-headquartered businesses with a value of between £75 million and £500 million.

1.11 Is there a chance this won't go ahead?

Shareholder, regulatory and court approval is still needed for the deal to complete. The offer has the support of Sanlam, a 52% shareholder.

1.12 What happens in the short term?

Nucleus will continue to operate as it does today but will be owned by a parent company (James Hay Holdings) and will sit alongside James Hay. It is the intention of James Hay that the existing business activities of Nucleus and James Hay will continue within the Combined Group but that the two businesses will merge over the medium-term to become one of the largest advised platforms in the UK.

1.13 What impact does this have on the Board and the running of the company?

On completion of the deal, the non-executive directors (including the Sanlam directors) of Nucleus will stand down. The current board will continue to be responsible for the company until completion

1.14 Who oversees the purchase?

As Nucleus is a publicly limited company the acquisition and approach is overseen by the Takeover Panel. They are an independent entity who ensure that takeovers are completed in an equitable, transparent and fair manner for all shareholders, and that certain key stakeholders are appropriately consulted

2 Sanlam / potential buyers

2.1 Why do Sanlam want to sell?

Sanlam have given no indication as to the reasons why they have chosen to sell their stake in Nucleus at this time, but as majority shareholders it is their prerogative to sell at any time.

3 Communication

3.1 Are we communicating with clients?

Yes, we will shortly email/write to all clients notifying them of the intended change of ownership. We will provide details of content and timings once these are known.