Schroders has reached an agreement to acquire a 75% shareholding in European renewable infrastructure manager Greencoat Capital, for an initial consideration of £358 million.
The deal includes a potential earn out, payable three years after completion, which is subject to stretch revenue targets, the continued employment of the senior management team in the Greencoat business and is capped at £120 million.
As part of the transaction, Greencoat, which has assets under management of £6.7 billion, will have access to Schroders’ distribution, sustainability capabilities, management experience and brand. The firm will also become part of Schroders Capital, Schroders’ private markets division and be known as Schroders Greencoat.
Schroders will have the option to acquire the remaining 25% shareholding over time at a price based on a fair market valuation at the time of the option exercise. The offer will be exercisable by Schroders, or the Greencoat management shareholders.
Meanwhile, Greencoat’s management team, which is led by its four founders Laurence Fumagalli, Bertrand Gautier, Stephen Lilley and Richard Nourse, will continue to run the business day to day.
Peter Harrison, group chief executive of Schroders said: “Greencoat is a market-leading, high growth business, with an outstanding management team, which provides access to a large and fast-growing market in high demand among our clients.
“Its culture is an excellent fit with ours and Greencoat’s focus aligns very closely to our strategy, continuing our approach of adding capabilities in the most attractive growth segments we can provide to our clients.”
Greencoat’s specialities in renewable energy infrastructure investing, including wind, solar, bioenergy and heat, aligns with Schroders’ wider strategy to build a private assets platform and furthers its position in sustainability.
The specialist investment manager has delivered compound AUM growth of over 48% per annum over the past four years to 31 March 2021, with revenues growing by 36% over the same period. The firm posted revenue and pre-tax profits for the 12 months to 31 March 2021 of £38.2 million and £20 million respectively.
Schroders said that the transaction aligns with its strategy to build a private assets platform and enhances its position in sustainability.
According to Schroders said there is also strong investor demand for long-duration assets that provide long-term secure income streams.
The US and European market for renewable energy assets is forecast to grow by more than $1 trillion by 2030.
Nourse added: “Combining this team with Schroders’ global distribution network and expertise will enable clients to capitalise on the unequalled opportunity that our sector represents - a trillion dollar investable universe - and the chance to meaningfully support the global transition to net zero.”
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