By Mathieu Rosemain and Pablo Mayo Cerqueiro
PARIS (Reuters) -In a show of confidence that strengthens the Rothschild family's grip on its Paris-listed investment bank, the financial dynasty said on Monday it plans to take Rothschild & Co private.
Rothschild & Co, best known for its deal-making division that once employed French President Emmanuel Macron, has grown over the last three decades beyond pure advisory for mergers and acquisitions and into wealth management, private equity and debt financing.
That development, formerly led by David de Rothschild and now by his son Alexandre, means the family does not need as much access to capital from the public equity markets, the family holding Concordia said.
"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."
Family-owned businesses often list just a fraction of their shares, but Rothschild & Co stands out for the sizeable amount of stock available on the market, "attracting perhaps too much [attention] on every day share price to the detriment of long-term goals", Philippe Very, a professor of strategic management at France's EDHEC Business School, said.
The Rothschild family owned close to 55% of the bank's shares and 69% of exercisable voting rights at the end of last year, based on the bank's website. Concordia is the No. 1 vehicle of the family holdings in the company, with a 39% stake.
The announcement did not come as not a surprise to analysts.
One analyst following the stock said taking the company private would entitle the Rothschilds to a bigger windfall from the group's growing private equity business. Equally, it makes sense to tap funding now before interest rates climb further, the analyst added.
Concordia said it is in advanced discussions with banks investors to secure financing for the deal.
At a time of slower M&A activity and falling advisory fees, the take-private move would shield the group from the day-to-day scrutiny by the markets.
Deal-making revenue at the five largest U.S. banks slumped 53% in the fourth quarter from a year earlier, based on data compiled by Reuters.
In Europe, investment banking income at Deutsche Bank and UBS Group AG dropped 71% and 52% respectively in the last three months of 2022.
Under the plan, Concordia, Rothschild & Co's largest shareholder, is poised to file a tender offer for the shares at 48 euros each, Rothschild said.
The price represents a premium of 19% compared with Rothschild & Co's closing stock price on Friday of 40.25 euros, and a 34% premium to the volume-weighted average share price of the last four months.
Rothschild's shares surged 16.5% in early trading on Monday to 46.9 euros per share, valuing the group at 3.6 billion euros ($3.88 billion).
The plan will go to shareholders on May 25, Rothschild said, adding that an exceptional dividend of 8 euros per share would be paid if Concordia follows suit with its buyout offer.
Rothschild & Co's revenue was 2.2 billion euros for the first nine months of 2022, with gains across all business lines, as per its latest earnings report.
The bank said it would provide further details on the plan on Feb. 13, when it reports full-year results.
Rothschild & Co was first listed in Paris under the name Paris-Orleans in 1838. Listed rivals include Lazard, Perella Weinberg Partners and Evercore.
($1 = 0.9289 euros)
(Reporting by Mathieu Rosemainand Pablo Mayo Cerqueiro, additional reporting by Stefania Spezzati, Blandine Henault; editing by Silvia Aloisi, Emelia Sithole-Matarise, Bernadette Baum and Jane Merriman)