00:00The Schroder's CEO, Richard Oldfield. Good morning, sir. Why are you selling?
00:06Well, Guy, I'm going to take us back a second. There were two announcements this morning.
00:09The first one was our results. And it's important as context of the deal. Our operating profit was
00:15up 25% to 757 million. EPS is up 39%. This is a great business. It's in a really strong
00:21foundation.
00:23But what we are doing here is creating this powerhouse of asset and wealth active management.
00:29It's going to have an unparalleled breadth of public to private capabilities. And at
00:352.5 trillion, it gives us the firepower to actually invest in our business and make ourselves
00:40more relevant to clients. It's a business combination that's almost perfect on paper.
00:46We have total complementarity. There's no overlap in geographies, really. There's very little
00:52overlap in products. So we're about growth. We're not about taking money out of the system.
00:56We actually drive this business and create something really powerful. And the cultures
01:01fit. The heritage, the 300 years together. So it's not just, you mentioned our two centuries
01:05of history. Naveen comes with more than 100 years of history as well. And that actually
01:10helps us have very similar cultures. And as you mentioned, Guy, this is all about the
01:15city of London. We put that right at the heart of the deal, making commitments to the UK
01:18and London. Richard, did they call you? Did you call them? Where did the conversation
01:23start? How did it go? Kind of just give me a bit of colour here.
01:28Well, as you'd expect of the last year, I've been talking to many of my peers around the
01:33world about how they respond to the industry challenges that we've got. And what became
01:38clear as I met Bill is that we had businesses that were very similar and we discussed the
01:43complementarity. And that led to them approaching us with an offer earlier in this year.
01:50Richard, good morning to you. So you mentioned there that this is about having the firepower
01:55to invest. Would it be right to say that AI has changed the landscape and the requirement
02:02to invest in that technology to find that an opportunity rather than a threat means that
02:07it's better done with a larger business? Is that one of the drivers?
02:11Well, that's definitely one of the drivers because the scale of this operation will be
02:15able to create more capacity to invest in our business. And it's not just about AI. Actually,
02:20when you think about our industry, it's about tokenisation and distributed ledger technology.
02:25It's about reshaping our industry, about different distribution models. And yes, it's about AI in
02:31terms of how we do research, how we do portfolio construction, how we access wealth clients.
02:36So I think there's a whole range of technologies here that are going to transform our industry as
02:41other industries. And we need to be right at the forefront of that change.
02:45You talked about making commitments around the city of London, Richard. And we read in our stories
02:49this morning that London is going to be the headquarters of the non-US business. What do
02:53those commitments look like, though? How watertight are they?
02:57Well, they're all listed in the 2.7 offering document. And I think Nuveen have been pretty
03:02clear. London will be the non-US headquarters for at least five years. There are commitments about
03:09jobs over the subsequent two-year period. We'll have about, to put this in context for you, Anna,
03:16there's 3,100 people in the combined group right here in London. And that's the largest location of
03:22any office for Nuveen. And it would be about a third of the overall workforce. So this is a
03:29big, sizable presence here in London. We're not stepping back at all from our commitment to
03:34support the UK capital markets, be at the centre of how policies are formulated, be at the centre of
03:39how people come to market. So I think the commitments are very watertight and they're very real.
03:45And I think it just shows the size of the UK and London in the overall group.
03:50Richard, what are your commitments on jobs? Can we expect, should we expect that there will be
03:55jobs that will go as a result of this acquisition?
03:58Well, Tom, look, it's a great question and lots of people are asking that. But there's a very firm
04:04commitment that there won't be job losses from this. Go back to why we're doing the deal. It's
04:09complementarity, right? We don't have overlapping investment capabilities. We're taking the strength
04:15and depth of Nuveen's private markets capabilities, fixed income and US distribution. And we're putting
04:20that with our public markets heritage, some of our specialist capabilities in private markets and
04:27our UK, European and Asia distribution. So there isn't an awful lot of challenges here in terms of
04:33overlapping headcount. So there is a very firm commitment that people will keep their jobs,
04:37except for some PLC functions. Obviously, we won't need that going forward. And of course,
04:41we already had some plans from a transformation perspective. But I think it's a really firm
04:46commitment to keep jobs here, to keep talent here, to keep capabilities here in London and the other
04:51investment centres that we've got across the world at Schroders.
04:55What do you think it tells us about the broader cost structure pressures for active fund managers?
05:02Well, I think what we've done really well over the last 12 months is show that we can actually
05:07take our own medicine, Tom, right? So we've been through a transformation programme,
05:10we've taken more than £75 million out of our P&L successfully this year. That's allowed us
05:16to drive the revenue up. So there's a lot that we can do to manage our own cost pressures as
05:20an
05:20industry. But as Anna talked about, there are new areas where we need to invest, where we need to
05:26develop new products. And that is best achieved when we actually have scale and broader capabilities for
05:32our clients. Richard, was Bill the only conversation you had, Bill Huffman, the CEO of Nuveen? Did you
05:41talk to anybody else? Were there others in the bidding for the business? Would you expect somebody
05:46else potentially to come in? This is an interesting asset. Is there possibly somebody else that could be
05:54interested in it? Again, I'm just curious as to how this developed and why you've ended up with Nuveen
06:01rather than somebody else? So this business has never been up for sale. And that's quite important
06:08because we are confident in our own plan, Guy. And actually, we have conviction that we can
06:14deliver value for shareholders. When this offer was made, it comes from an organisation that I respect
06:20enormously. It comes from an organisation that will drive value for our clients, for our people.
06:26And actually, it is a price that I think is super attractive to our shareholders. 17 times 20,
06:3325 earnings compare very well with similar transactions. We have got a premium on spot,
06:40I think, of 34%. We are at a 61% over a 12-month VWAP. So I feel really confident,
06:49sorry, it's a 30% premium to spot. It's 34% of the last 30-day VWAP. So this is
06:54really attractive
06:56for our shareholder base. And what it does is it crystallises immediately the value in our organic
07:01plan, as well as actually the future benefits that we think we can achieve through that combination
07:06with Nuveen. There is support from our principal shareholder group. So that's sort of locked at 41%
07:12of the shares. Okay. And can I ask you, you mentioned AI. Are you clear on what AI will do
07:18to wealth management, asset management and research? Because the market seems to be wrestling with this
07:23question. Well, I don't think any of us have the actual answer. And I think AI will change the
07:29industry, not just wealth management, but asset management as well, in ways that today we can't
07:34see. But we're already using it here at Schroder's. We're using it in terms of how we connect with our
07:39clients. We're using it in terms of how we provide research. We're using it in terms of portfolio
07:44construction. So it's already changing the industry. And I think sometimes people think
07:50we haven't been changing because of AI over the last few years. But that has been happening.
07:54We'll continue to see change. But people also want to see people in wealth management. And that's a
07:59really important thing we've got to remember. Richard, before we let you go, are you staying on
08:04the CEO or moving on elsewhere? I am. I'm really excited by this deal. Really,
08:09we're going to drive value for our clients, for our people. I think this is a great opportunity.
08:14So I'm committed to being here. I'll be the CEO of Schroder still from an international business
08:20perspective.
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