RBC Capital Markets has revised its recommendation on Schroders Plc (LON:SDR), downgrading the asset manager from "outperform" to "sector perform." The move follows Nuveen's cash proposal for Schroders, which RBC says leaves limited scope for meaningful share-price appreciation beyond the offer level.
In a research note, RBC observed that Schroders' market price is trading close to the implied value of the 612p-per-share bid from Nuveen. Reflecting the cash terms in the proposal, the brokerage raised its price target to 610p.
RBC quantified Nuveen's approach as a £9.9 billion offer, which it calculated to be a 34% premium to Schroders' previous closing price and to value the company at 16.3 times forecast earnings for 2026. The brokerage also noted that this premium is 21% higher than Schroders' seven-year average price-to-earnings multiple of 13.5 times.
According to RBC's report, the Schroders board has accepted the offer and Nuveen has obtained irrevocable commitments from the Schroders family and company directors amounting to approximately 42% of the group's share capital. Those commitments, the brokerage said, make the bid "likely to succeed," a development that in turn reduces the potential for additional upside in the stock.
RBC made modest upward adjustments to its forecasts in the note. Revenue estimates for both 2026 and 2027 were increased by 1%, and adjusted diluted earnings per share for 2026 were lifted by 4%. The revised projection for 2026 adjusted diluted EPS is 37.55p, compared with the prior estimate of 36.12p. RBC explained that cost expectations were nudged higher to reflect management guidance on the cost-income ratio.
The brokerage included a scenario analysis to illustrate possible price paths. It reported the prevailing share price of 585.50p sits below the offer level but close enough that further material upside is unlikely while the acquisition is pending. In a downside scenario where the offer fails, RBC placed a valuation at 515p, derived from a discounted cash-flow model using a 14% weighted average cost of capital and a 1% long-term growth rate.
Conversely, an upside scenario of 670p assumes a counterbid at a 10% premium to Nuveen's proposal. RBC stressed, however, that the report found no evidence indicating such a rival bid is underway.
While the brokerage reiterated that the takeover underpins the current valuation of Schroders' shares, it also flagged several risks that could affect the company's performance if the acquisition does not proceed. Those risks include a failed offer, weaker fund performance and sharp declines in equity markets, all of which could pressure flows and earnings.
Takeaway - RBC's downgrade reflects the view that Nuveen's 612p offer, supported by substantial irrevocable commitments, leaves little room for Schroders' stock to climb materially above the bid level. Small forecast upgrades to revenue and EPS do not counterbalance the limited upside posed by the likely success of the offer.