EUROPE – An unspecified number of jobs are set to go with the acquisition by Friends Provident’s ISIS Asset Management of F&C Management from Eureko, which values the deal at more than a billion euros.
“I think we can say there will be job reductions,” said Alain Grisay, F&C’s current deputy chief executive who will be head of institutional business, alternatives and real estate at the merged entity. “There will be rationalisations. There are overlaps.” The merged entity will have about 1,000 employees.
He declined to be more specific – but referred to “obvious” economies of scale. The companies said they have identified annual savings of 33 million pounds by 2006.
Grisay said the institutional business would account for 80% of the combined company’s business. He added that initial client reaction had been “very, very positive” to the merger announcement. He said the new firm would target pension funds in Europe.
Referring to the European asset management industry, he added: “Consolidation will happen, it must happen. Everyone talks about it, no-one does it.” A recent report from PricewaterhouseCoopers had queried whether there would be any merger activity in the sector this year.
The companies said the transaction would create the fourth largest asset manager in the UK and a “top ten manager of European pension fund assets” with 120 million pounds under management.
The merged entity would include the largest active manager of Dutch pension assets.
ISIS chief executive Carter would be CEO of the merged entity with F&C CEO Robert Jenkins as non-executive chairman. Tony Broccardo, F&C’s chief investment officer, will become CIO.
ISIS’s institutional business will be incorporated into the institutional platform and business of F&C. “F&C’s institutional investment philosophy and process will be extended to the assets of the institutional clients of the enlarged group,” they said in a statement.
F&C’s retail business will be incorporated into ISIS’s retail platform. F&C will be the principal brand of the combined group.
The group will derive 58% of its revenues from the UK, 22% from the Netherlands, nine percent from Portugal and 11% from other European markets.
A spokeswoman for Eureko put the value of the transaction at around one billion euros. “We expect to realise over a billion euros,” said Lorrie Morgan. “It’s an excellent deal for us, it’s an excellent deal for everybody.” She added Eureko would likely use the proceeds to fund expansion into EU accession countries, in particular Poland.
Friends Provident will own 51% of the enlarged ISIS-F&C after the deal is completed, expected in September. Eureko, including F&C management and staff, will hold 23%. The rest, 26%, will be publicly held.
The companies will review their outsourcing arrangements before the deal is completed. F&C outsourced fund administration to Mellon in 2003 while ISIS has reached a similar deal with J P Morgan.
The companies said: “The merger is based on a common vision, value creation and complementary business fit.”
Carter said: “This is a unique opportunity for us to achieve our stated objective of becoming a top five UK asset manager, extend our franchise into continental Europe, create a more diversified business and provide a platform for meeting our clients’ needs in terms of both product and investment management capability.”
Jenkins, who had been pursuing a share sale for F&C before this deal, said: “This transaction achieves our aim of a listing for F&C, creates value, deepens our investment talent and does so in a way which will be nondisruptive to our clients. We are very enthusiastic about the merger.”