Caledonia Investments (CLDN) has agreed to sell its top holding in wealth manager Stonehage Fleming for around £288m in cash.
The disposal of its six-year investment, which accounted for 7.5% of its £3bn global multi-equity portfolio, comes after Stonehage, multi-family investment office, sold its business to Miami-based Corient Private Wealth.
Caledonia will receive £251m for its 36.7% stake in Stonehage Fleming when the deal closes in the first half of next year with a further £37m paid in two tranches six months and a year after completion. Another £9m may be paid if Stonehage Fleming hits three-year revenue targets under its new owner.
The stake was valued at £221m at 31 March, meaning Caledonia will enjoy a £67m or 30% uplift.
Combined with the dividends it received, Caledonia says it made a 3.2 times return on its initial £90m investment in 2019. The proceeds will be held on deposit for future reinvestment.
Deutsche Numis said this marked another successful investment in the wealth management sector after Caledonia took a majority stake in 7IM in 2015 for £74m and sold in 2023 for £255m.
“We imagine Caledonia’s more arm-length style of ownership, whilst backing strong management teams, is attractive in a sector where retaining culture under private equity ownership can be difficult,” said Ewan Lovett-Turner, head of investment company research.
Stonehage Fleming manages over $175bn (£130.5bn) in 13 jurisdictions. It is combining with Stanhope Capital which has $40bn in assets that Corient, the US wealth arm of Canada’s CI Financial, has also bought today. Corient runs $216bn in the US and today’s marks its global expansion with total assets leaping to $431bn.
Launched in 1960 as an investment vehicle for the Cayzer shipping family, Caledonia has steadily broadened its shareholder base with an aim of beating the FTSE All-Share over 10-year periods and generating a real return of 3%-6% over inflation in the medium to longer term.
The self-managed investment company invests in public and private companies both directly and through third-party funds. At 31 July 29% was held in private equity, 30% in funds and 37% in public companies. The Stonehage position was in the private equity bucket.
Over 10 years to 1 September its growth in net asset value has generated a 157% total underlying return, beating the 114.5% from the FTSE All-Share. However, the shares have lagged the portfolio, currently trading on a 32% discount, to deliver a 110.6% return for shareholders.
Our view
James Carthew, head of investment company research at QuotedData, said: “If you watched our show on Friday about private equity trusts you’ll have seen the fund managers talk about the impressive returns that they can achieve from their investments and the uplifts in NAV that they often achieve when they sell them. Caledonia’s announcement this morning provides an excellent illustration of that, having made over three times its money in six years and reporting a 30% uplift in the exit valuation, which adds 2.2% to the NAV. To me, this just underlines how daft it is that investors seem to be penalising trusts that hold unlisted investments. Caledonia’s discount does not reflect its track record or its potential.”
