James Moore: F&C could do a lot better for itself before it seals a deal


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The Independent Online

Outlook F&C was born out of Foreign & Colonial, the venerable investment trust and when it comes to the fund manager's future it seems that it's game, set and (almost) match to the colonials in the form of Bank of Montreal.

The City says it's open for business and it doesn't matter if you're colonial or just foreign, if there is even a small premium to the price you offer and the board of the target company says yay (and sometimes if it doesn't) then it will sell.

Bank of Montreal's premium is 28 per cent compared with the shares' Friday close, the last day before its interest was made known. That's nice, but it's a long way from being a knockout. Well the money for all those Lloyds Banking Group shares the Government wants to offload has to come from somewhere!

And if there's any left over, surely the London Stock Exchange can rustle up a few more post-Soviet natural resources companies with oligarchs who want to cash in to tickle their fancy further down the line.

As Standard Life has commendably pointed out, this deal appears to do far more for Bank of Montreal than it does for F&C's shareholders. It doubles the bank's assets under management and internationalises it, furthering its ambitions to become a “globally significant” money manager.

It is true that F&C is a business that has struggled in recent times. Its “strategic” partners – pension funds and the like – have been pulling assets out and the shares have been on the slide for the past year despite the surgery turnaround specialist Ed Bramson applied to the business .

But opportunities to do a deal like this are very rare. There aren't that many medium-sized independent money managers about in a landscape dominated by giants together with tiddlers that like to be called “boutiques” and not much else.

F&C was probably always going to fall to someone at some point. In addition to its own troubles there are several challenging industrywide issues to deal with. Costs are rising, and regulatory burdens are growing heavier. But the report card on this deal still reads: Could do better.