For a horse-racing enthusiast like Martyn Arbib, the sale of Perpetual, his pride and joy, will prompt mixed feelings.
The thoroughbred fund management house, of which he is chairman and founder, has fetched him some £450 million thanks to a £1.1 billion bid by US group Amvescap.
However, Arbib may stop to wonder what sort of price Perpetual might have commanded had he managed to sell it when it was at the top of its game two years ago.
The sale has valued Perpetual shares at £35.80 but sceptics say Arbib was looking for more in the region of £45.
Speculation has surrounded Perpetual, and its possible sale, since even further back than that. In the rapidly consolidating fund management world which has seen a spate of takeovers in the past three years, Perpetual, quirkily set outside London’s Financial centre in leafy, riparian Henley-on-Thames, was always a plum target.
Now it follows Mercury, Newton and Gartmore into the hands of more powerful US groups. As a result of the deal Perpetual will now sit alongside Invesco, another UK fund manager, within Amvescap. The brands are set to co-exist, for the time being at least.
Perpetual will hope it does not suffer the same performance misfortunes of its predecessors that have struggled in the Caps performance measurement tables.
Indeed its numbers have been on the slide throughout a year that has been overshadowed by acquisition rumours. Perpetual’s First attempts to sell to Amvescap stalled in May but the embers have been kept glowing by the good relations of Arbib and Charles Brady, Amvescap’s chairman. Arbib declared himself delighted that he was able to Finish the deal with “the people we originally started speaking to”. For his part, Brady, upon announcing the deal, told Arbib in front of reporters: “I’m glad to see you sitting by the side of me, partner.”
Perpetual has found an ideal owner, according to Arbib, who was also considering bids from JP Morgan, now dealing with its acquisition by Chase, and Citicorp. “I’m very pleased we’ve joined a fund management company, rather than a mixed organization where you don’t get the focus,” he says.
Perpetual shareholders will receive two Amvescap shares and £10 for each original share and its staff join a group that will now have $430 billion of assets under management.
Arbib will keep an eye on his old organization, becoming one of Amvescap’s leading private shareholders. He intends to help out with integration.
It is always a tricky task for new owners to pander to the whims and egos of the fund managers from the organization they acquire but provided Amvescap can reassure Perpetual’s staff that they will be accommodated, the deal should work in their favour as they get the global reach and resources of a big backer. No doubt there will be strong incentive packages being offered for star fund managers to keep them on board.
Perpetual, which Arbib founded in 1973, made its name, and its fortune, out of retail investment through tax-efficient personal equity plans (Peps) in the UK where for a long time it was a stellar performer. Recently it has not been shooting the lights out but it is still a strong contender in the retail market -seen by many observers as having far more long-term potential than institutional business.
At the time of the sale, Perpetual was managing almost £12 billion in assets for more than 800,000 private investors. It has made £66 million this year.
The Perpetual sale is not the only recent deal among UK fund managers: in Scotland, Aberdeen Asset Management is acquiring Murray Johnstone for £150 million.
Aberdeen, which is showing ambition in its domestic retail market, beat off rival bids from US and European competitors to woo its Scottish neighbour. It is now chasing down Scottish Equitable in the list of its country’s leading institutions measured by funds under management.
