F&C Asset Management Plc, a London- based money manager, agreed buy Thames River Capital LLP for as much as 53.6 million pounds ($81.8 million) to add hedge funds that generate larger fees.
F&C will pay 33.6 million pounds up front and an additional 20 million pounds should Thames River meet targets over the next two years, the London-based company said today in a statement. F&C will sell new shares to investors to help fund the deal.
F&C, which traces its roots to 1868, has been seeking acquisitions to expand its client base and add higher-margin products since it was spun off from Friends Provident Plc last year. Talks with C-Quadrat Investment AG, a Vienna-based fund manager, broke down last month. Friends Provident, bought by Resolution Ltd. last year, has agreed to invest money with F&C until 2014, after which it will be free to move its investments elsewhere.
The acquisition will help “expand beyond our traditional bias towards insurance funds” into products with higher margins, F&C Chief Executive Officer Alain Grisay said on a call with reporters.
Talks with C-Quadrat ended after the discussions “became a very public affair” and before F&C had finished convincing its shareholders of the merits, Grisay said. The company has investors’ “full support” for the Thames River purchase, he said.
The company plans keep all Thames River’s fund managers and reduce costs through merging back-office functions such as IT, the CEO said.
F&C dropped 3.1 percent to 63.25 pence at 8:52 a.m. in London trading, valuing the company at about 305 million pounds. The stock has fallen 9 percent in the last week.
Thames River Capital, founded in 1998, had 4.2 billion pounds of assets under management at March 31, F&C said. The hedge fund manager will be run as an “autonomous” business within F&C and will keep its current management team headed by CEO Charlie Porter.
The acquisition will be “earnings enhancing” within a year of its completion, Chief Financial Officer David Logan said on the call. The purchase is expected to be complete by the end of the third quarter, he said.
Separately, F&C said today that funds under management rose 3.8 percent in the first quarter to 101.5 billion pounds. The business is trading in line with management expectations, F&C said.
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