British Bid Boosts U.S. Fund Companies

Shares of major U.S. mutual fund companies got a boost Monday after another of their peers agreed to a takeover by a foreign firm.

United Asset Management (ticker symbol: UAM) of Boston soared $3.17, or 15%, to $23.73 after London-based Old Mutual agreed to pay $1.46 billion in cash, or $25 a share.

Among other fund firms that have been viewed as potential takeover candidates, T. Rowe Price Associates (TROW) rocketed $5.63 to $48, Alliance Capital (AC) gained $1.94 to $50.13, Neuberger Berman (NEU) rose 81 cents to $41.25 and Federated Investors (FII) rose $1 to $33.

The Old Mutual deal for UAM is the third time in just over a month that a European financial firm has snapped up a U.S. fund company and adds significantly to the already heavy foreign presence in the $7-trillion U.S. mutual fund market.

Analysts said Europe’s asset managers are targeting U.S. know-how and seeking to meet burgeoning demand for equities investments as the Continent’s economies are transformed by the euro and the increasingly globalized economy.

“You have had an equity revolution in Europe and these acquisitions are part of that,” said John Hatherly, head of global analysis at British fund firm M&G.;

With the deal, Old Mutual gains access to UAM’s network of more than 40 asset-management affiliates and takes a big step toward entering the U.S. market.

Among Southern California money managers in the UAM family are Analytic Investors, NWQ Investment Management and First Pacific Advisors, all based in Los Angeles; Pacific Financial Research, based in Beverly Hills; and Provident Investment Counsel, based in Pasadena.

“They [Old Mutual] get a substantial factory in the U.S. which is absolutely essential if you want to have a global asset management company,” said fund consultant Burton Greenwald.

In similar moves, France’s CDC Asset Management agreed Friday to buy Nvest Cos. (NEW) for $2.2 billion. Last month, Italy’s UniCredito Italiano agreed to buy Pioneer Group (PIOG) for $1.2 billion.

The purchase of UAM, which manages about $188 billion through its affiliates, will increase Old Mutual’s assets under management to $275 billion.

Investment analysts said the price, at 1.2% of assets, looked fair. Measured in that way, the transaction was cheaper than other big recent deals in the asset management sector. German insurer Allianz recently paid 1.8% for Newport Beach-based giant Pimco.

Analysts said the lower price was probably due to UAM’s concentration on old-style pension fund management--known as defined benefit plans--which generate lower fees than the retail funds that make up the heart of Nvest and Pioneer.

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Riding the Fund Buyout Wave Shares of mutual fund firms T. Rowe Price Associates (ticker symbol: TROW) and Neuberger Berman (NEU) hit record highs on Monday, after rival United Asset Management agreed to a takeover by Britain’s Old Mutual PLC. Weekly closes and latest for T. Rowe and Neuberger: Source: Bloomberg News