By:  Serach Nissim

The legendary Rothschild family wants to take its financial giant, Rothschild & Co., private.

Rothschild & Co., the investment bank, first listed on the Paris exchange in 1838, would like to become a private family company again. The company, founded in 1811 London by Nathan Mayer Rothschild, is currently publicly listed, with 38.95% of the shares and 47.5% of the voting rights owned by the family though the family’s holding company named Concordia.  As reported by Reuters, on Monday, Concordia announced, in a display of confidence, that the family no longer needs as much access to capital from the public equity markets.  “Furthermore, each of the businesses is better assessed on the basis of their long-term performance rather than short-term earnings,” Concordia added.  “This makes private ownership of the Group more appropriate than a public listing.”

The company, formerly led by David de Rothschild, 80, and now by his son Alexandre, 42, has expanded over the last three decades beyond just advisory for mergers and acquisitions, stretching to include wealth management, private equity and debt financing. The company is well-known for its deal-making division, at which French President Emmanuel Macron was formerly employed.

Analysts were not too surprised to hear about the company’s aspirations to go private again.  “They’re getting big in the private equity business and they want to make the most of it for themselves,” an analyst told Reuters, adding that trading volume for the stock has been low.  “With interest rates rising, better to do it now rather than later if they need bank financing.”  Also, now that mergers and acquisition deals have slowed down and advisory fees have shrunken, making the firm private would help protect its activities from the pressure and daily scrutiny which the markets requisite.

Reuters reported that big banks have been struggling with declining revenue.  At the five biggest US banks, deal-making produced revenue that was down 53 percent in the fourth quarter compared to the prior year, as per data compiled by Reuters.  In Europe, investment banking income at Deutsche Bank plummeted 71 percent, and fell 52 percent at UBS Group, in the last three months of 2022.

In order to achieve private ownership, Concordia, as Rothschild & Co.’s biggest shareholder, is poised to file a tender offer for the investment bank’s remaining shares at 48 euros each, Mr. Rothschild said in a statement. The price includes a 19 percent premium over Rothschild & Co.’s closing stock price on Friday of 40.25 euros.   Shareholders will be given an outline of the privatization plan on May 25, the investment bank said, adding that a dividend of 8 euros per share will be additionally paid if Concordia succeeds with its buyout offer.

Following the announcement, Rothschild’s share price jumped 16.5 in morning trading, up to 46.9 euros per share.  This gives the company a valuation of $3.88 billion.  Rothschild & Co. reported revenue of 2.2 billion euros for the first nine months of 2022, with profits posted for all business sectors including deal advisory and wealth and asset management, as per its latest earnings report.  The group warned, however, of a “more challenging year” ahead, with lower deal activity and declining assets under management leading to a decline in income from fees. The company is slated to reports full-year results on Feb. 13, at which time it said it will also share more details on the private ownership plan.