F&C in Talks to Be Bought by Canada’s BMO for $1.2 Billion

Jan 27, 2014 8:56 am ET

(Updates with analyst comment in ninth paragraph.)

Jan. 27 (Bloomberg) -- F&C Asset Management Plc, manager of the U.K.’s oldest investment fund, said it’s in talks to be acquired by Bank of Montreal for about 697 million pounds ($1.2 billion). The stock surged as much as 27 percent.

Bank of Montreal, Canada’s fourth-largest lender by assets, made an indicative offer of 120 pence a share, the London-based money manager said in a statement today. Shareholders will also receive the 2 pence annual dividend for 2013, the company said. The stock jumped 22.2 pence to 115.7 pence by 1:47 p.m. in London.

“F&C and BMO are in advanced discussions,” the money manager said. “F&C has indicated to BMO that it is likely to recommend a firm offer at the offer price.”

The interest comes five months after activist investor Edward Bramson stepped down as chairman. Bramson had criticized the company’s costs, levels of debt and acquisitions. He then sought to boost the fund manager’s performance by cutting costs and focusing on the firm’s traditional business areas such as investment trusts and managing fixed-income assets for insurers. Bramson’s Sherborne Investors LLC sold 111 million shares, or about 19 percent of the company’s outstanding stock, in November, according to data compiled by Bloomberg.

F&C had about 90.1 billion pounds of assets under management at the end of September, down from 92.3 billion pounds at the end of June. The firm earns more than 90 percent of revenue in mainland Europe and the U.K., while Bank of Montreal makes more than 97 percent of its sales in Canada and the U.S., according to data compiled by Bloomberg.

More Offers?

Bank of Montreal must now make an offer or cancel the bid by 5 p.m. local time on Feb. 24 to comply with U.K. takeover rules, according to F&C.

“We have no further comment,” Bank of Montreal spokesman Paul Deegan said.

The potential offer may flush out other bidders, David McCann, an analyst at Numis Securities Ltd. with a hold rating on the stock, said today in a note to clients.

“Anyone who was strategically interested will have likely already been contacted by Bramson before he exited a few months ago and already concluded not to bid,” said McCann. “Nonetheless, we believe a counteroffer is not impossible.”

--With assistance from Doug Alexander in Toronto. Editors: Edward Evans, Keith Campbell, Jon Menon