Bidders set for £100m battle over New Star

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The Independent Online

New Star Asset Management, the fund manager that controlled a tenth of the retail investment market as recently as two years ago, will be sold for a knock-down price by the end of the month.

The investment company, which last year came close to collapsing as it struggled with borrowings of £240m, is understood to have received modest indicative bids from a clutch of rivals with retail fund management operations.

The bidders are thought to include Schroders, Henderson, Gartmore and Neptune Investment Management, although private equity groups also continue to monitor the situation.

One party involved with the sale process said the leading bidders were offering a little over £100m and that a preferred bidder would be named by the end of the month.

New Star, founded by the industry stalwart John Duffield just seven years ago, ran into trouble during the autumn, as investors began to withdraw money in the wake of a run of poor performances from many funds.

Floated in November 2005, New Star raised a total of £240m of debt in 2007, primarily in order to fund a special dividend for shareholders.

The fund manager is now controlled by a consortium of banks, which in December agreed to waive the loans that have been made to New Star in return for equity in the fund manager. New Star's share price fell 98 per cent last year.

New Star's new owner will get a sizeable fund management business, despite its recent problems. At one stage, New Star had assets under management of close to £20bn, though this fell back to £12bn by the end of last year. Subsequent market movements have increased the total to close to £14bn.

In addition, New Star has repeatedly won favour with retail customers, thanks to a series of high-profile advertising campaigns and several high-profile appointments of well-known managers. Some 300,000 individuals are thought to have holdings in its funds.

However, the sale of the company is likely to bring the investment career of Mr Duffield to an end. New Star's founder is currently its executive chairman, but he has already signalled he will leave the company once the sale is complete.

Mr Duffield launched New Star in 2001, shortly after selling Jupiter Asset Management, the business that he founded in 1985, to Germany's Commerzbank.