UBS on Thursday revised its recommendation on Schroders Plc, moving the shares from a "buy" to a "neutral" rating while raising its 12-month price target sharply to 590 pence from a prior 480 pence. The change follows a recommended cash acquisition proposal from U.S.-based asset manager Nuveen that places a value of £9.9 billion on Britain’s largest listed asset manager.
The proposed consideration totals 612 pence per Schroders share and is structured as a 590 pence cash offer combined with a permitted dividend of 22 pence per share. UBS noted that the all-in consideration represents a 34% premium to Schroders’ closing price on Feb. 11, the trading day immediately preceding the offer announcement.
Market pricing shortly after the announcement shows Schroders trading below the full offer amount. As of Feb. 17 the stock was quoted at 586 pence, which UBS calculates to be approximately a 5% discount to the 612 pence total consideration.
Nuveen has already secured substantive support for the proposal. Commitments covering 42% of Schroders’ issued share capital have been obtained from the Principal Shareholder Group Trustee Companies, the Schroders family and the Schroders board. The offer is conditional on achieving 75% shareholder approval and is expected to reach completion in the fourth quarter of 2026 if it proceeds as planned.
Under UBS’s summary of the transaction, the combined organisation would oversee about $2.5 trillion of assets under management, allocated across private markets, fixed income and equities. UBS cites a breakdown of roughly 17% in private markets equal to $414 billion, 25% in fixed income equal to $613 billion, and 30% in equities equal to $735 billion.
Given the level of premium embedded in Nuveen’s proposal and the donor-driven character of client relationships in asset management, UBS does not expect rival or hostile bids to emerge. The bank also views the fragmented nature of the global asset management sector as making significant regulatory obstacles unlikely. Nonetheless, UBS identified the primary downside risk as the possibility that the transaction does not complete.
UBS explained that the downgrade to neutral reflects the fact that its price target is now effectively anchored to Nuveen’s offer level, which reduces potential upside from prevailing market prices. To illustrate a range of outcomes, the bank set out three valuation scenarios: a 650 pence upside case should a higher offer be forthcoming, a 590 pence base case aligned with the current cash consideration, and a 480 pence downside reflecting UBS’s prior pre-offer valuation if the bid were to collapse.
Separately from the rating change, UBS upgraded its earnings outlook for Schroders after the company reported full-year 2025 results described by the broker as a strong beat. UBS raised its diluted EPS estimates for 2026 through 2028 by about 11% per year. The updated earnings forecasts are 40.16 pence for 2026, 43.64 pence for 2027, and 47.29 pence for 2028, compared with earlier projections of 36.25 pence, 39.40 pence and 42.69 pence respectively.
On UBS’s financial model, net operating revenues for Schroders are projected at £2.67 billion in 2026, increasing to £3.03 billion by 2028. The bank anticipates expansion in EBIT margins from 28.2% in 2025 to 30.6% in 2026 and 31.9% by 2028. Net management fees are forecast to rise to £2.49 billion in 2026 from £2.28 billion in 2024, with UBS attributing this to asset under management growth and a roughly stable revenue margin of around 34 basis points.
UBS’s view of Schroders’ market performance under the offer implies modest returns relative to UBS’s market return assumption. The brokerage calculates a forecast stock return of 4.4%, composed of 0.7% in price appreciation and a 3.7% dividend yield, versus a market return assumption of 8.6%, resulting in an implied forecast excess return of -4.2%.
Crucially, UBS stated that its valuation is now solely predicated on Nuveen’s all-cash bid. Were that bid to fall away, UBS said attention would revert to a set of risks and drivers that it sees as central to Schroders’ standalone valuation. These include performance risk and market risk, currency exposure - noting that approximately two-thirds of Schroders’ assets under management are denominated in foreign currencies - and regulatory and reputational risks.
In addition to UBS’s analysis, an AI-driven stock screening product cited in the note evaluates Schroders alongside many other companies using a broad set of financial metrics and highlights which names might fit various strategies. The note references past winners identified by that system but does not change UBS’s market view or its assessment tied to the takeover proposal.
Summary
UBS downgraded Schroders to neutral and raised its 12-month price target to 590 pence after Nuveen tabled a recommended all-cash offer valuing the firm at £9.9 billion. The offer comprises 590 pence in cash plus a 22 pence permitted dividend, for a total of 612 pence per share, and is supported by commitments equal to 42% of issued share capital. UBS says the proposal sets a valuation floor and identifies the possibility of deal failure as the principal downside risk.
Key points
- Nuveen’s recommended all-cash proposal values Schroders at £9.9 billion, offering 612 pence per share in total - 590p cash and a 22p dividend.
- UBS moved Schroders to a neutral rating and raised its 12-month price target to 590p, noting the bid largely anchors the near-term valuation and curtails upside.
- Following Schroders’ full-year 2025 results, UBS upgraded EPS forecasts for 2026-2028 and projects revenue and margin expansion; combined AUM of the merged group is forecast at about $2.5 trillion across private markets, fixed income and equities.
Risks and uncertainties
- The transaction may not complete - UBS identifies the failure of the deal to materialise as the principal downside risk, which would reintroduce stand-alone valuation pressures.
- Currency exposure and market/performance risk would regain prominence if the bid collapses, with roughly two-thirds of Schroders’ AUM denominated in foreign currencies.
- Although UBS does not expect rival offers or regulatory barriers given the industry structure, the outcome still depends on achieving 75% shareholder approval for the proposal to proceed.