J.C. Flowers to fund Interactive Investor’s buy of TD European unit

U.K. online investment service Interactive Investor Plc has agreed to acquire the European direct investing business of Canada’s TD Bank Group. No financial terms were disclosed for the deal, which is expected to close in the first quarter of 2017. The acquisition will create the United Kingdom’s second largest online stockbroker with assets of £18 billion, London-based Interactive said. J.C. Flowers & Co, a U.S. private equity firm focused on financial services, will provide funding for the transaction and will be the majority owner of the combined company.

PRESS RELEASE

Interactive Investor PLC Agrees to Buy TD Bank Group’s European Direct Investing Business

LONDON, October 12, 2016 /PRNewswire/ —

Acquisition highlights
Creates UK’s 2nd largest online broker*, with over 300,000 customer relationships and AUA of £18bn
The combination brings together Interactive Investor’s low charge customer proposition with TDDI’s international capabilities, and will be firmly on the side of the individual investor
Funds advised by J.C. Flowers & Co. LLC to own a majority shareholding in the combined company
Combination creates an online broker with the capabilities to invest in products, services and technology that benefit customers

Introduction
Interactive Investor plc (“Interactive Investor”) has agreed to acquire TD Bank Group’s European direct investing business, through the acquisition of the shares of TD Wealth Holdings (UK) Limited and TD Bank International S.A. (Luxembourg) (collectively, “TDDI”).

The acquisition will create the UK’s second largest online stockbroker* with assets under administration (AUA) of £18 billion.

Customer benefits
On completion of the acquisition, customers will benefit from a combined business that seeks to build on Interactive Investor’s heritage as a low charge challenger broker and TDDI’s reputation as one of the UK’s leading online investing providers. TDDI also provides additional geographical reach, allowing customers to trade 32 markets, in nine currencies.

Post closing Interactive Investor and TDDI customers will enjoy the benefits of a business with the scale and financial strength to invest in leading technology, products and services.

The combined business will be firmly on the side of the individual investor; helping investors by providing efficient customer service, competitive and transparent charges, and easy access to online investment and saving services.

There will be no immediate change for the customers of either Interactive Investor or TDDI.

Transaction details
Interactive Investor’s acquisition of TDDI will be financed through an investment from funds advised by J.C. Flowers & Co. LLC, which, following completion, will have a majority shareholding in the combined business. Interactive Investor’s existing shareholders that are participating in the transaction will also become shareholders in the combined company. Closing is expected in the first calendar quarter of 2017 subject to customary closing conditions, including receipt of required regulatory approvals from the FCA, CSSF and ECB, and the approval of Interactive Investor’s shareholders.

Management
The enlarged business will be led by Adam Seale, II plc’s current CEO. Hugo Van Vredenburch and Barry Bicknell, respectively II’s current Chairman and CFO, will be the Chairman and CFO of the combined business. John Tracy, current CEO of TDDI, will continue to assist during a transitional period to support the integration.

Commenting on the acquisition, Adam Seale, CEO of Interactive Investor, said: “This combination will bring real benefits to both Interactive Investor customers and TD Direct Investing customers. The enlarged Interactive Investor will have increased scale, expertise and resource, enabling it to provide customers with award winning online investment services at low charges. We look forward to welcoming all our new customers to Interactive Investor and championing the needs of individual investors.”

Leo Salom, Executive Vice President, TD Wealth, TD Bank Group, said: “We’re very pleased to have reached this agreement with Interactive Investor, a highly regarded team who will ensure that TDDI customers continue to have access to excellent products, services and technology to meet their investing needs for the long term. With this transaction, we will remain focused on our core areas of growth in North America, where we are a top-10 financial institution with an ambitious agenda to expand our Wealth franchise, which currently serves 2.2 million clients and has more than $700 billion in client assets across Canada and the U.S.”

Tim Hanford, Head of Europe, J.C. Flowers & Co., said: “JCF has a long history of working with entrepreneurial management teams to deliver transformational change. This transaction will create a new leader in the investment sector for private investors at a time of industry change due to the low rate environment and a refocusing of priorities by global financial services groups. We look forward to working with Interactive Investor to complete this complex acquisition from TD, and to establish the combined business on an efficient operating platform that delivers innovative wealth management services to all its customers.”

Background to Interactive Investor plc
Interactive Investor’s history reflects the story of the way the internet changed the balance of power in favour of private investors, giving them access to tools and services once only available to professionals – allowing them to harness the power of technology to invest quickly and cost-effectively. Interactive Investor is proud to be firmly on the side of the investor. The business started in 1995 as an online aggregator of news, commentator on markets and a forum to discuss the topics of the day. Today, with an established and significant brokerage business, Interactive Investor offers a complete suite of services and products that investors can use to research, learn about and trade markets. Interactive Investor provides customers with ISA and SIPP services, execution only share, fund, gilt and bond trading, and a white labelled solution for spread betting and CFDs. Customers can invest in UK and international main market equities, small companies via the Alternative Investment Market (Aim), or collectives including investment trusts, funds and ETFs. The II website features a shortlist of around 190 independently selected Rated Funds and a range of model portfolios that allow customers to narrow down the best options for inclusion within their account. Interactive Investor’s approach is open and transparent throughout: importantly, fees are based on the transactions, not the opaque world of percentage-based charges, linked to the level of assets held in an account.

Interactive Investor owns Moneywise, the UK’s leading Personal Finance website and magazine, and Money Observer, the leading investment website and magazine. It also publishes specialist retirement magazine How to Retire in Style. These inform and educate millions as they look to take greater control over their financial affairs. Combined, the II, Moneywise and Money Observer websites attract over 11.6 million visitors a year.

Background to TD Direct Investing
TD Direct Investing has been serving retail investors in the UK since 1998 and globally through its International Business in Luxembourg since 2000. It holds £14.5bn of assets for its customers. Assets have grown by £2bn – an increase of 16% – and over 16,000 new customers have joined TD Direct Investing over the last year. The company was one of the first to launch a mobile trading app in the UK, and it’s Advanced Trading Platform allows sophisticated traders the ability to customise their trading experience. Since gaining regulatory permissions to provide customers with non-personalised advice in April 2015, TD Direct Investing has launched a raft of new propositions to help traders and investors make confident decisions, including a list of Recommended Funds, Quick Start Funds and a technical insight offering. It is a leader in the provision of International trading, allowing customers to trade in 16 countries across 45 exchanges, and is one of the only providers that offers a free multi-currency service.

Background to J.C. Flowers & Co. LLC
J.C. Flowers is a leading private investment firm dedicated to investing globally in the financial services industry. Founded in 1998, the firm has invested more than $15 billion of capital in 46 portfolio companies in 16 countries across a range of industry subsectors including banking, insurance and reinsurance, securities firms, specialty finance, and services and asset management. With approximately $6 billion of assets under management, J.C. Flowers has offices in New York and London. For more information, visit jcfco.com.
*Source: “UK D2C Guide: Direct Platform Market Update”, Platforum, 22 July 2016

Forward Looking Statements
This announcement may include forward-looking statements. These forward-looking statements are based on Interactive Investor’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Interactive Investor, which could cause actual results to differ materially from such statements. Interactive Investor makes no undertaking to subsequently update or revise the forward-looking statements made in this announcement to reflect the circumstances or events after the date of that release.

Photo courtesy of Reuters/Mark Blinch