(Bloomberg) -- Close Brothers Group Plc has agreed to sell its wealth unit to Oaktree Capital Management for an equity value of as much as £200 million ($265 million) as it looks to strengthen its balance sheet amid a regulatory review of its motor finance practices.
The equity value of Close Brothers Asset Management includes £28 million of deferred consideration in preference shares and Close Brothers will retain all upfront cash proceeds of about £172 million, the London-based financial services firm said in a statement Thursday. The deal is expected to be completed in early 2025 after it receives certain regulatory approvals.
Close Brothers is among lenders bracing for the outcome of an investigation by the Financial Conduct Authority into consumer allegations that their car loans were priced in a way that treated them unfairly while banks pocketed money in so-called discretionary commission arrangements with dealers — a practice banned in 2021. The FCA has warned motor finance firms to begin preparing for additional costs that may arise from its probe.
After scrapping dividend payouts for 2024, Close Brothers said in March that it had identified measures that would bolster capital by as much as £400 million by the end of the 2025 financial year. Already, Lloyds Banking Group Plc, the biggest provider of car finance, has set aside £450 million to pay for possible compensation and other costs.
“The transaction is expected to increase the group’s common equity tier 1 capital ratio by approximately 100 basis points, marking significant progress towards the plan we outlined in March 2024 to strengthen our capital base,” Chairman Mike Biggs said in the statement.
The sale comes days after the company announced that Chief Executive Officer Adrian Sainsbury has taken temporary medical leave of absence, with Chief Financial Officer Mike Morgan filling in for him.
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