EFM clinches Dunedin takeover for pounds 83.5m

NIC CICUTTI

Edinburgh Fund Managers is taking over Dunedin, the investment house owned by Bank of Scotland, in an pounds 83.5m deal. The move brings to an end months of damaging speculation about the prospects for the troubled Dunedin group.

The deal positions EFM in third place among investment trust providers, with 8 per cent of the UK market. EFM also gains Dunedin's venture capital and private client businesses.

EFM, with more than pounds 8bn of funds under management, also gains potential access to the key US market so successfully built up by Dunedin until the company ran into big problems last year.

Iain Watt, chief executive at EFM, said: "We view this as a unique opportunity to create a substantial business which we believe can be developed successfully for the benefit of our shareholders and clients."

Mr Watt said EFM was among several fund managers to express an interest in Dunedin last December, after reports of the company's internal wrangles first surfaced.

Bank of Scotland, which has owned more than half of Dunedin since 1989 through its subsidiary, British Linen Bank, told EFM on Monday that its bid had won - if it could complete the purchase by yesterday.

Mr Watt said: "It did involve burning the midnight oil, but we were able to raise the funds necessary within three days.

"It was in the best interests of everyone that this question was resolved as soon as possible. There is nothing worse than delay on a matter like this."

The purchase of Dunedin comes as EFM yesterday reported pre-tax profits of pounds 12.8m in the 12 months to the end of January 1996, compared with pounds 13.7m the previous year.

Dunedin employs about 150 at offices in Edinburgh, Dundee and Chicago. It manages pounds 2bn in six investment trusts, plus pounds 1.1bn from Bank of Scotland's pension fund.

Under its former chairman, Hamish Leslie Melville, the fund manager also broke into the US market and succeeded in attracting about pounds 2.5bn in the past three years, bringing the total under management to pounds 5.6bn.

The firm was, however, rocked by a series of rows following the sudden departure last year of Gordon Anderson, head of investment.

The crisis accelerated after resignations by Peter Tait and Nigel Barry, two of Dunedin's investment directors, together with Doug Waggoner, who ran its US operation. Allegations of an abrasive management style and a refusal to reward fund managers appropriately were also made.

Mr Melville and Alan Kemp, his deputy chief executive, left the firm last year. Despite attempts by Dunedin to reassure its clients that business would continue as usual, it faced a haemorrhage of funds - particularly in the US where fund managers took pounds 1.6bn of business elsewhere just a few weeks after the internal wranglings became public knowledge.

Mr Watt said he was hopeful of persuading several key US corporate clients to remain with EFM, but accepted that more funds would be lost. However, he stressed that Dunedin's purchase price had not included a consideration for the US funds.

Eric Sanderson, chief executive at British Linen Bank, said yesterday that he was "delighted" at the outcome.