F&C Asset Management’s shares slumped yesterday after the City fund manager said it would pay £33.6m in cash and shares for hedge fund boutique Thames River Capital.
F&C, which will hope to spur growth with the deal after a spell of lacklustre performance, saw its shares slip 3.1 per cent to 63.25p yesterday despite positive responses from analysts. The deal will also see F&C pay a further £20m depending on the performance of Thames River.
The 142-year-old institutional player takes on nine investment teams and a batch of absolute return-orientated funds with £4.2bn under management. Nevsky Capital, Thames River’s sister company, is excluded from the transaction and will carry on as a stand-alone entity.
F&C’s takeover lands a multi-million pound windfall for financier Sir John Beckwith, who founded Thames River in 1998 and holds a majority stake through his Pacific Investments vehicle. Chief executive Charlie Porter, the colourful Zimbabwean who once described himself as “the most overpaid nanny in the world”, receives a smaller sum.
F&C boss Alain Grisay told City A.M. there would be “a lot of cultural benefits” to be gained from Thames River’s entrepreneurial approach. He added the two businesses’ products and distribution operations were “extraordinarily complementary”.
F&C suffered outflows last year as uncertainty over its ownership hung over the firm. In a brought-forward interim statement, the group said the first three months of the year showed net inflows for the first quarterly period in five years. Net new money came to £117m, with assets under management rising 3.8 per cent to £101.5bn.
CITIGROUP, HSBC AND JPMORGAN
ADVISING on F&C’s buyout of Thames River and the five per cent share placing it will use to part-fund the deal are Citigroup, HSBC and JPMorgan Cazenove.
Leading Citi’s team is Andrew Thompson, an experienced corporate broker who joined the Canary Wharf-based firm from ABN Amro Hoare Govett. Stuart Dickson and William Wilson are in charge at HSBC, while Mike Collar and Neil Haycock take the helm at JPMorgan.
Sources close to the transaction described yesterday’s share price dip as “a spot of indigestion” caused by the announcement of the small share placing. F&C’s advisers believe it has taken Thames River at a bargain price, with £33.6m payable upfront and a further £20m dependant on the boutique meeting certain targets in 2011 and 2012.
F&C boss Alain Grisay and Thames River chief Charlie Porter are good friends and are understood to have been speaking about a tie-up for around six months.
Porter’s ongoing role as head of the unit within F&C is designed to ease the transition. Key staff are also being locked in with an incentive programme worth up to £35m in deferred F&C shares. Thames River will stay based in the West End.