STM LON:STM, the AIM-listed, financial services fund has today (11th July) announced that it has received an offer to acquire the company from Pension SuperFund Capital, the defined benefit pensions fund aggregator, at a price of 70p a share valuing the business at around GBP40m.
Management at STM have written to shareholders advising them that if a firm offer comes in from SuperFund, that it would recommend acceptance of the offer.
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STM’s shares jumped on receipt of the announcement from 27.9p at close of play on Monday (10th July) to around 50p by lunchtime.
The Isle of Man-based company has offered investors a 63.8% year-to-date return, a 96.7% one-year return with its shares ranging in price from 21p to 61.5p over a 52-week period.
The company has a market cap of GBP16.3m.
STM can trace its history back to 1989 and the foundation of The Fidecs Group by Tim Revill as a holding company for a Spanish legal, tax, and accountancy firm based in Sotogrande, Spain.
Fidecs experienced swift initial growth, especially on the back of Spanish offshore business, prompting the company to set up in Gibraltar. By 2007, Fidecs was attracting interest overseas and it was acquired by STM Group and admitted to AIM in March. From that point on STM increased its scope through the aggressive acquisition of corporate and trustee service providers in various international jurisdictions, growing to become one of the largest CTSPs in Gibraltar.
Pensions admin
Buoyed by the growth of its CTSP business, STM then entered the pensions administration market, a vast entity with pensions assets being around GBP1.3 trillion in the UK alone at the end of 3Q22 – and something STM had been dabbling in since 2006.
However, with a market that vast, mo’ money brings mo’ problems; as Notorious B.I.G. noted, not least scheme reconciliations; the government-mandated need for providers to give scheme members the choice to decide how benefits are paid; regulation and de-risking and the whole process of communication with scheme members, collating their views and acting upon them.
STM moved into the provision of pensions schemes, specifically concentrating upon schemes for overseas residents recognised by the UK Tax Office. To support the development of its pensions funds management business, STM also launched a life assurance business in 2008, allowing the company to develop bespoke wrappers and service the growing high-net worth market and opening up access to exotic investments including private equity, hedge funds, REITs and EIFs.
International provision
As Brexit came and went, STM was unfazed, given its Gibraltar headquarters as it could continue writing business in the European Union, passporting products and services into Member States to acquiesce with specific taxation and insurance infrastructure and out of that segwayed into the provision of retirement solutions for international clientele, specifically expatriates. The company started operations in Malta, which has over 70 double taxations treaties with various global jurisdictions. A large feather in STM’s caps was the acceptance by HMRC to provide products and services to expats living in the United States and currently STM has over 10,000 pensions under management in over 100 countries.
STM has changed radically since 2007 and its floatation on AIM. It now has a much more international focus, as opposed to UK institutional, and to propel itself into the international retirement and life assurance business it is going to need a lot more ammunition.
This is likely the rationale behind the merger with Pension SuperFund Capital which has assets under management near GBP15bn. Pension SuperFund Capital could view STM as a waymaker into the UK pensions sector. Given the keenness of the UK government to utilise the assets squirreled away in UK pensions funds to create a UK Silicon Valley and is set on having at least 5% of pensions funds’ assets committed to private equity, the sleepy institutional investment industry might be set for another Big Bang, with tens of billions committed to fintech, biotech and start-ups and this merger – should it go through – should set a combined STM/Pension SuperFund Capital for a revolution in investing and consolidation in the UK marketplace.
Regulatory approval
That said, this is early days in a potential deal. The deal has yet to be formally approved by shareholders of both companies and the regulators, and given STM’s multi-jurisdictional business, this includes the FCA, the Gibraltar Financial Services Commission, the Malta Financial Services Authority and The Pensions Regulator.
STM reported revenues of GBP24.1m, a bit behind revenues of GBP22.4m in 2021, with profit before tax of GBP3.3m up on the year previous’ PBT of GBP2.8m mostly attributable to the acquisition of the Mercer books which contributed GBP800,000 of revenue in the year, and revenue growth in its life companies of GBP1.5m.
