MAM's escape might prove short-lived

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The Independent Online
Mercury Asset Management, Britain's largest institutional fund manager, looked poised finally to escape the clutches of its troubled parent, Warburg, following yesterday's announcement of its takeover by Swiss Bank Corporation.

Under the deal, the 75 per cent of MAM shares owned by Warburg will be distributed among Warburg shareholders, giving MAM a market value estimated to be over £1.5bn. But Mercury's wide distribution in the market will expose it to predators.

Speculation quickly returnedin the City that MAM's independence may not last long, given the keen interest among several big financial players to buy their way into the lucrative fund managment business.

There are few large shareholder-owned fund managers in the UK, making MAM a prime target.

NatWest Group is known to have its eyes on MAM, while GE Capital of the US has also made plain its desire to build up its fund management operations in Europe.

Sir David Scholey, chief executive and chairman of Warburg, said yesterday: "Mercury is becoming a widely held and extremely independent public limited company with a very strong capital base and very strong profits. There is no reason for that not to continue."

Relations between Mercury and Warburg had soured dramatically of late, with the fund manager complaining its parent did not have the financial backing it wanted. MAM went openly on the offensive, saying it wanted to be rid of Warburg, after the failure of the planned merger between Warburg and Morgan Stanley late last year.

Despite its strong reputation, MAM is a maturing management business, heavily dependent on one market, UK pension funds. If it wanted to diversify abroad, it would probably have to call on the capital of a bigger parent. But any bidder would have to dig deep, with MAM shares currently at something like 20 times earnings.