Amvescap sceptical of Canadian bid interest, yet the fund manager is ripe for takeover

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The Independent Online

Amvescap is one of those big, boring fund managers - London listed but American based - that hardly anyone took any notice of until it became caught up in the so called "market timing" scandal a couple of years ago, an abuse of small investors for which it was eventually forced by US regulators to pay $450m in settlements. Already poleaxed by the post-bubble bear market, the shares have been under a cloud ever since, making the company, which in this country trades under the Invesco name, a sitting duck for takeover in a fast consolidating, global fund management industry.

Even so, few expected CI Financial to be the first to come crawling out of the wood work. Little heard of on this side of the pond, CI is a Canadian manager of mutual funds which is actually quite a bit smaller than Amvescap. Few details of CI's interest are known, other than that it only really wants Amvescap's Canadian operation, AIM Trimark, and if it could would gladly forget the rest. Since AIM Trimark is very much the jewel in the Amvescap crown, the board had little difficulty in rejecting CI's offer for just these assets out of hand.

CI then returned, saying it might be prepared to bid for the whole thing. Amvescap's chairman, Charles Brady, is understandably sceptical of CI's ability to make an offer at a realistic price. CI is 34 per cent owned by Sun Life of Canada, so it is possible that the two could bid together and then divide up the assets between them.

The only difficulty with this approach is that it's hard to see what Sun Life would want with Amvescap's US and European assets. The Canadian press, where speculation that CI was planning a bid first surfaced, has suggested a price of $5.6bn for Amvescap, which equates to roughly 1.5 per cent of funds under management. Other recent fund management buys have been at less demanding valuations - some at less than 1 per cent - so assuming CI can come up with the money, Amvescap will at least have to give it serious consideration.

The Canadians are striking at a moment of weakness. Now approaching his 70s, Mr Brady still carries the title of both chairman and chief executive. Somehow or other, he survived the market timing scandal, but it took its toll, none the less, with a massive outflow of funds and just recently Mr Brady has at least been persuaded to relinquish the chief executive's role. Headless and listing badly, Amvescap would seem ripe for consolidation. Downtrodden shareholders can only hope that CI's declared interest might spark a bidding war. Mr Brady can be as sceptical as he likes, but CI is the first decent piece of news investors in Amvescap have had for quite a while.

Loathe sport, but love the Olympic boost

Not every Londoner is relishing the prospect of hosting the Olympics in seven years time. A colleague is already making arrangements to be out of the country for the duration. Yet even if you hate sport, or think there already too many tourists in London for its own good, it's hard to quarrel with the promised economic impact, which in the round is likely to be substantially beneficial.

Of course, the direct impact is of hardly any significance at all. As Steven Andrew, chief economist at F&C Asset Management, points out, the total budget for the Games at just £1.5bn is neither here nor there in the context of annual personal consumption in the UK of £750bn. Nor is associated capital spending of about £10bn over seven years, mainly on improvements to transport infrastructure, of any more than marginal significance set against annual business investment in the UK of about £120bn.

The sums are not to be sneezed at, and there will justifiably be an almighty row if the facilities built turn out to be of no lasting use - for that would amount to a humongous misallocation of capital - but in the round the amounts are too small, even taking account of the boost to tourism, to have much of an impact on growth. So why do I say the economic impact will be considerable?

The more significant benefit is of an intangible, unquantifiable variety. It is to do with the feel-good factor, British pride, a sense of optimism and a nation at ease with itself. That in itself is a powerful force for growth. From sick man of Europe little more than 20 years ago, Britain is already transformed into Europe's most prosperous large economy in terms of GDP per head.

The comparison with France's failure to win the games is hard to ignore. For French people, it must seem symptomatic of a nation in decline, a cruelly poignant reminder of cultural and economic self doubt. The games might have given the nation renewed hope, pride and dynamism. Losing to Britain in this, the anniversary year of the Battle of Trafalgar, is a particularly bitter pill to swallow. France's malaise stands out in sharp contrast against Britain's economic renaissance.

As if to celebrate the win, the stock market index of UK economy centric mid-cap companies, the FTSE 250, yesterday hit a new all-time high. Housebuilders and construction companies were in particular demand. Even the more international FTSE 100, still languishing deep below its turn of the century peak, achieved a new three-year high.

Winning the Olympics is a recognition of how far the British economy has come as well as an opportunity to celebrate and sell to the world all things British - even our food. Before hosting the Olympics in 2000, Australia was to most nations just another far away place, a land of kangaroos, vulgar jokes, beer-soden barbies and waltzing matilda. Today it's widely seen as the California of the South Seas, economically thriving and brimming over with new found self-confidence.

With yesterday's decision by the International Olympic Committee, the world's greatest sporting event is finally reunited with the world's greatest city. Even for those who loathe sport, that's reason to celebrate. By providing London with the excuse to regenerate and extend much needed transport infrastructure, it will also help underpin the City's position as the world's leading international financial centre. Two weeks of mayhem seems a small price to pay for the warm glow of success which will now drive the nation's spirit.

Man overboard in Somerfield bid

Even since the Viking invasion of the UK stock market began some four or five years ago, the question on everybody's lips has been: "Where's all this Icelandic money coming from?" The truth, I regret to say, is less exciting than the speculation. Iceland's entrepreneurs and financiers seem to be buying up everything in sight, but in fact, Iceland's total investment in UK plc since the invasion began is rather less than £2bn. Even for such a small country, this is not such a large sum.

The idea that Iceland has become a conduit for Russian mafia money, much touted in the City, is little more than fanciful. There are no scheduled flights direct between Russia and Reykjavik, and little sign of Kalashnikov carrying Russians crowding out the island's night spots. Indeed the only hard evidence of a connection at all is the fact that one of Iceland's leading financiers made his original fortune by selling a Russian brewery to Heineken.

Iceland is prosperous because it has a thriving fisheries industry and energy so cheap that its inhabitants think nothing of putting underfloor heating beneath their front drives to keep the snow off. It has also attracted a relatively high level of inward investment. None of this will make Baugur's UK partners in bidding for Somerfield any less suspicious of their fellow traveller now that its chairman, Jon Asgeir Johannesson, has been charged with fraud. Baugur's supporters put the whole affair down to local Icelandic jealousies and rivalries, but innocent or not, you cannot have a suspected fraudster sitting alongside you in the longboat. Whether the bidding consortium can survive Baugur's ejection remains to be seen.

j.warner@independent.co.uk

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