F&C Asset Management has entered into a conditional agreement to acquire the Thames River Capital for consideration of up to GBP53.6m.
The figure comprises initial consideration of GBP33.6m and conditional consideration of up to a further GBP20m payable in cash, loan notes and/or F&C shares if Thames River meets certain financial performance targets.
Thames River Capital is a London-based asset management business with an estimated GBP4.21bn of assets under management as at 31 March 2010.
The board of F&C believes the acquisition represents an attractive opportunity to enhance F&C’s business and is consistent with its strategy of developing a multi-specialist asset management business both organically and by selective acquisitions.
The initial consideration will be funded through a combination of a cash placing of F&C ordinary shares equal to approximately five per cent of F&C’s issued share capital, F&C’s existing cash resources and new indebtedness of GBP15m.
F&C will acquire, through Thames River Capital (UK), an economic interest in the management fee profits and performance fee profits generated by the investment teams, which for the 11 month period ended 28 February 2010 amounted to approximately 40 per cent in aggregate of those total profits.
F&C has also agreed terms under which its economic interest in the share of management fee profits of all of the investment teams can be increased over time.
Retention and incentive plans have been agreed for Thames River Capital’s key personnel under which conditional awards will be granted over F&C shares with a value equal to GBP35m that will be subject, in the case of the incentive plan, to the achievement of certain financial targets and vest between 30 months and six years after completion of the acquisition.
F&C will follow the same post-acquisition integration strategy for Thames River Capital as it adopted for its recent acquisition of Reit Asset Management.
The acquisition will exclude Nevsky Capital, a current associated undertaking of Thames River Capital. Prior to completion of the acquisition, Thames River Capital’s interest in Nevsky Capital will be demerged and will, thereafter, be directly held by the current Thames River Capital shareholders.
The acquisition is anticipated to close in or before the third quarter of 2010.
F&C’s assets under management rose 3.8 per cent over the first three months of the year to GBP101.5bn as at 31 March 2010. This reflected a combination of positive market movements and net fund inflows.
Alain Grisay (pictured), chief executive of F&C, says: “We recently reported strong investment performance during 2009 and an improved outlook for fund flows. Indeed, we have separately announced this morning that our business saw net inflows during the first quarter and is trading in line with our expectations. Having made good progress with our core business, our focus now is to increase the momentum of our sales into higher fee margin products. I am therefore delighted to announce the acquisition of Thames River Capital, which we believe will accelerate the shift to higher fee margin products and enhance our distribution capabilities.”
Charlie Porter, chief executive of Thames River Capital, says: “We think that a combination of F&C and Thames River Capital will create one of the most dynamic asset management firms in London, bringing together the history, strength and reach of F&C with all of those attributes of modern asset management that are embedded in Thames River Capital. The transaction will give us access to a wider infrastructure and a larger stage, while F&C are also particularly keen to preserve our vibrant culture within their framework.”
Lexicon Partners, Citigroup Global Markets and HSBC Bank are acting as joint financial advisers to F&C in relation to the proposed acquisition.