Acquisition of Citi Trust

16 September 2024

JTC PLC

(the "Company" and together with its subsidiaries "JTC" or the "Group")

Acquisition of Citi Trust

Cements JTC's position as the leading independent provider of global trust services

JTC, the global professional services provider, is delighted to announce the proposed acquisition of the global fiduciary and trust administration services business ("Citi Trust" or the "Business"), from Citigroup Inc. ("Citi") for a total consideration of $80million (the "Acquisition").

The Acquisition is subject to customary regulatory approvals in all relevant jurisdictions and is expected to complete in H1 2025.  The Acquisition will be funded from the Group's existing cash reserves and committed debt facilities.

Acquisition highlights:

·    Citi Trust provides a full suite of fiduciary solutions and has extensive cross-border experience, operating from seven high-quality trust jurisdictions globally (New York, Delaware, South Dakota, Jersey, Singapore, Switzerland and the Bahamas)

·  The Business generates diversified, predictable and recurring revenue as a result of its long-held relationships with over 2,000 ultra-high net worth ("UHNW") clients, with an average relationship tenure of c.12 years

·     The total AUA serviced by Citi Trust is in excess of $70 billion

·    Highly complementary to JTC's existing footprint and cements JTC's position as the leading independent provider of global trust services

·     Further strengthens and scales JTC's US trust platform, adding to the successful acquisitions of New York Private Trust Company (November 2022), South Dakota Trust Company (August 2023) and First Republic Trust Company of Delaware (August 2024)

·   The Acquisition is expected to deliver mid-single digit EPS accretion in 2025 and high single digit EPS accretion in 2026, the first full year of ownership

·     Immediately post completion of the Acquisition, JTC anticipates leverage to be c. 2.0x net debt/ underlying EBITDA, which is expected to reduce throughout 2025 and 2026, in line with JTC's stated guidance

Background to Citi Trust

Citi Trust is one of the oldest and most established fiduciary businesses globally, inclusive of the first US trust company originally founded in 1822 in New York, with its first international trust company founded in 1960.

The Business provides a full suite of tailored trust solutions, operates from seven high quality trust jurisdictions (New York, Delaware, South Dakota, Jersey, Singapore, Switzerland and the Bahamas). The total AUA serviced by Citi Trust is in excess of $70 billion across over 2,000 UHNW client relationships, with an average tenure of c.12 years.

The Acquisition brings with it an experienced senior management team with over 150 years of collective trust experience, supported by a skilled global employee base.

Strategic rationale

Cements JTC's position as the leading independent provider of global trust services

·    Growth markets: Bolsters several of JTC's key growth jurisdictions, including the US, by enhancing the Group's trust service offering in four of the top six¹ fastest growing trust centers globally

·    Attractive client base: Citi Trust serves an ultra-affluent customer base, who are increasingly likely to have complex fiduciary needs best served by a client-focused, independent trust services model

·   Significant expertise: Citi Trust employs people globally providing tailored, local expertise to deliver services within the context of increasingly complex global regulatory requirements

High degree of recurring revenue and significant long-term value creation potential that JTC is well positioned to capture

·    Stable revenue generation: 97% of total revenue is driven by recurring, annuity trust administration fees, providing a stable base from which multiple avenues of growth and earnings upside are achievable

·   Leverage client referral program: Post completion, JTC will become a trusted partner of Citi, through which the Group will benefit from a referral arrangement for new trust relationships from Citi's Private Bank, intended to assist in accelerating client and revenue growth

·  Realisation of platform synergies: Significant overlaps across JTC's Private Client Services core infrastructure and that of Citi Trust's paves the way for margin expansion as the Acquisition is integrated into JTC's global platform

Significantly strengthens and scales JTC's US platform

·    US becomes JTC's largest jurisdiction by revenue: Further increases JTC's overall US footprint, with the US now expected to represent the largest of any single jurisdiction in the Group's network on the basis of full year pro-forma revenue contribution

·    Additional scale in the world's most attractive jurisdiction for global wealth: Post-completion of the Acquisition, JTC will have over 420 employees in offices across 8 US cities, providing both Private Client Services and Institutional Client Services, enabling JTC to further develop and expand its service offering in a large and growing market

·    Complementary to recent US M&A: Citi Trust is highly complementary to JTC's recent US Private Client Services acquisitions of First Republic Trust Company of Delaware, South Dakota Trust Company and New York Private Trust Company. The Acquisition will provide opportunities to accelerate the Group's previously announced strategy to increase share of wallet in the wider Private Client Services market in the US

Continuation of institutional and bank carve out M&A strategy:

·    Successful track record: The proposed acquisition builds on JTC's strong track record of integrating bank carve-outs, which includes the acquisitions of Kleinwort Benson's fund administration business in 2015, Merrill Lynch's international trust & wealth structuring business in 2017, RBC's employee benefit plan administration business in 2021 and First Republic Trust Company of Delaware from JPMorgan in 2024

Financial benefits of the transaction

Given the profile of Citi Trust, both in terms of the client base and geographic footprint and drawing on JTC's prior experience with successfully integrating bank carve-outs, it is anticipated that once Citi Trust is integrated into the more focused and efficient JTC platform, the Business will achieve the Group's well-established guidance of 33%-38% underlying EBITDA margin in the medium-term. The Acquisition is expected to deliver mid-single digit accretion to Group EPS in 2025 and high single digit EPS accretion in 2026, the first full year of ownership.

Immediately post completion of the Acquisition, JTC anticipates leverage to be c. 2.0x net debt/underlying EBITDA, which is expected to reduce throughout 2025 and 2026, in line with JTC's stated guidance.  

Nigel Le Quesne, CEO of JTC, said:

"Citi Trust is one of the most established and well-respected providers of trust services globally and we are delighted to have been chosen as the future custodian of its employees and clients. The acquisition is extremely complementary to JTC's existing footprint. It is a transformational transaction for the Group and our Private Client Services Division, increases our presence in key growth markets in the US, Europe and Asia, and brings further resilient annuity driven revenue to the Group. We look forward to welcoming their highly experienced team to JTC, so that together we can capture the future growth opportunities that the global trust administration market offers".

Ida Liu, Head of Citi Private Bank, said:

"The decision to sell our personal trust administration and fiduciary business allows us to focus our resources on areas that will create impact for our global clients and drive growth for our Wealth business. We will continue to provide clients with leading investment management, wealth planning, lending and banking services, while JTC will provide the highest quality trustee and fiduciary services. We are confident our clients and colleagues will benefit from JTC's singular focus on trust administration and we are pleased our clients will continue to work with the world-class trust administration team they've relied on at Citi Private Bank. We look forward to working together as we transition this part of our business."

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About JTC

JTC is a publicly listed, global professional services business with deep expertise in fund, corporate and private client services. Every JTC person is an owner of the business and this fundamental part of our culture aligns us with the best interests of all our stakeholders. Our purpose is to maximise potential and our success is built on service excellence, long-term relationships and technology capabilities that drive efficiency and add value.

http://www.jtcgroup.com/

¹ BCG Global Wealth Report 2024