NUCLEUS Financial chief executive David Ferguson has said a planned takeover of the firm that staff have opposed could be good for the business despite uncertainty about what it will mean for employees including himself.
Directors of Edinburgh-based Nucleus have recommended that shareholders accept a bid for the financial technology firm by a rival that values the business at around £145m.
Shareholders are due to vote on the 188 per share cash offer by Salisbury-based James Hay on March 30.
Earlier this month it emerged that Nucleus employees opposed the takeover amid “significant anxiety” about the impact on jobs at the firm, which supplies online platforms that clients can use to manage their investments on.
Nucleus employs around 400 people, including 130 in Glasgow.
James Hay has said there may be a moderate reduction in headcount at the enlarged group following the takeover where there is duplication or where operational efficiencies might be achieved.
A material number of Nucleus’ employees will transfer over the medium term to FNZ, which will provide platform technology for the enlarged group.
Asked yesterday about concerns expressed by staff, Mr Ferguson said the prospect of the takeover had created an understandable air of uncertainty at Nucleus. This has also affected members of the management team.
“We’ve experienced it as much as everybody else has frankly,” noted Mr Ferguson, who confirmed that he wants to remain with the enlarged business following the takeover.
Takeover regulations mean Mr Ferguson has not been able to have discussions with James Hay directors about any changes they may plan to make to the business.
“In any M&A deal there will be areas of duplication but I think at the moment I’m not sure how widespread they are, I don’t really have a greet insight into that,” said Mr Ferguson.
However, noting that Nucleus has been performing well amid the challenges posed by the coronavirus crisis, Mr Ferguson said the indications are that James Hay will not want to make big changes to what is a successful business.
He said: “It’s early days in the relationship but we see in the public formal announcements there seems to be a lot of belief in the brand and culture and what Nucleus stands for and we very much hope it will play out like that.”
Mr Ferguson said the takeover bid had been triggered by the desire of South Africa’s Sanlam to sell the 52 per cent stake it holds in the company, for which it provided early backing.
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But after running Nucleus as an independent business since he founded it in 2006, Mr Ferguson believes the firm could benefit from becoming part of a bigger group.
“There’s a load of work to be done here and we don’t feel remotely finished,” said Mr Ferguson. “You can see scale as potentially a big benefit in this sector … We’ve got scalability and by becoming part of a bigger group I hope that will push us on and allow us to really benefit.”
Mr Ferguson said Nucleus had benefited from its decision to continue investing in growth amid the convulsions in the market triggered by the coronavirus crisis.
Nucleus grew assets under administration on its systems by 8% in the year to December 31, to £17.4bn. Underlying profits fell to £5.1m before tax from £7.3m. Mr Ferguson said the fall reflected the investment made in long-term growth. The firm is on course to enjoy a record quarter in terms of new business activity.
In November Nucleus bought a business in Glasgow that it had been using to provide back-office services, for £1.5m.
James Hay was acquired by the London-based Epiris private equity operation in 2019.
A spokesperson for James Hay said: “We admire much about the skills within the Nucleus team and we are looking forward to working with them. We are excited about this transaction and the opportunity to create a leading, independent, adviser platform with the scale to invest in technology, products and services that will really help advisers. Our starting point will be a detailed evaluation of the Nucleus platform, with the full engagement and collaboration of the Nucleus team.”
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The spokesperson added: “Our ambition for integrating and combining the best of both businesses is reflected by the unanimous recommendation of the offer by the entire Nucleus Board and the Directors’ irrevocably undertaking to vote their shares in favour of the transaction.”
The takeover must be approved by shareholders who represent 75% of votes cast at meetings that will be held on March 30.
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