As highlighted in the recent interim report, lower interest rates and other factors have changed the outlook for private banking. This, coupled with its conservative risk appetite and opportunities for investment elsewhere in the group, has led Camellia Plc (the "Group") to review its earlier decision to invest further in Duncan Lawrie and it has therefore now decided to sell most of the Duncan Lawrie businesses.
The majority of Duncan Lawrie's UK loans and certain of its Isle of Man loans (the "Loan Book") have been sold to Arbuthnot Latham & Co. Limited for a cash consideration of £42.7 million, which equates to 95% of the value of the outstanding loans of £44.9 million. A subsequent orderly wind down of Duncan Lawrie's deposit taking and other banking operations in the UK and Isle of Man is proposed. Following this sale, Duncan Lawrie is fully funded to return all cash balances to clients.
Duncan Lawrie has also reached an agreement, subject to regulatory approval, to sell Duncan Lawrie Asset Management Limited to Brewin Dolphin Limited ("Brewin Dolphin"), a subsidiary of Brewin Dolphin Holdings Plc, for a cash consideration of £28.0 million.
Brewin Dolphin is one of the UK's leading discretionary wealth managers with over £35bn of funds under management and a long-term commitment to the market. As part of the transaction, the portfolio management team of Duncan Lawrie Asset Management Limited will move to Brewin Dolphin, providing continuity of service for clients and access to Brewin Dolphin's broader investment management and financial planning offering.
Camellia believes that both purchasers share the same high regard for client service as Duncan Lawrie and that in agreeing these sales, this should mitigate, as far as possible, the impact of these changes on clients and staff.
Discussions are underway with a number of other parties in respect of the sale of Duncan Lawrie's Isle of Man offshore trust services business.
The proceeds from these disposals will be used to repay depositors, meet any other liabilities of Duncan Lawrie and for investment in other parts of the Group.
The trading profits relating to the Loan Book in the year ending 31 December 2015 were £1.3 million and £0.8 million in the six months to 30 June 2016. The trading profits relating to Duncan Lawrie Asset Management in the year ending 31 December 2015 were £2.2 million and £0.6 million in the six months to 30 June 2016. These figures include costs which are not being transferred to the purchaser. The losses before taxation relating to the whole of Duncan Lawrie for the year ended 31 December 2015 were £3.6 million and £2.8 million in the six months to 30 June 2016.
The loss arising on sale of the Loan Book and significant closure costs of any proposed wind-down of Duncan Lawrie will be reflected in Camellia's financial results for the year ended 31 December 2016. The expected profit on disposal of Duncan Lawrie Asset Management and further operating costs relating to the proposed wind down will be reflected in Camellia's financial results for the year ended 31 December 2017.
Terms of the Loan Book sale
£34.7 million of the consideration is payable on completion today, with the balance of £8.0 million payable following novation or assignment of certain loan agreements which is expected to occur on 31 January 2017 ("Migration"). The consideration is subject to various adjustments on and shortly after Migration for loan repayments, advances and debt servicing costs in the period between 31 October 2016 and Migration.
Terms of the Duncan Lawrie Asset Management sale
Duncan Lawrie has agreed, subject to regulatory approval, to sell its wealth management business, Duncan Lawrie Asset Management Limited, but will retain the liabilities relating to the business, for £28.0 million payable at completion. The consideration is subject to a working capital adjustment.
This announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation (EU) N0. 596/2014