Fund manager vulnerable after stake sale

Clifford German
Sunday 23 October 2011 07:46

Edinburgh Fund Managers was yesterday left exposed as a potential bid target for European and US banks after the British Coal pension schemes disposed of its 32.5 per cent shareholding in the fund management group.

The placing forms part of a complex and inter-locking deal by the pension schemes that will reduce EFM's funds under management by 11 per cent, or pounds 900m. However, EFM, alert to the weakening of its position, said it still had control over pounds 6.7bn of funds and added that it would take less than two years to recoup the lost business.

In a series of deals, the pension schemes are liquidating their 85 per cent stake in the British Investment Trust (BIT), which itself is being wound up. This will release the minority shareholders who have been locked into the trust since the pension schemes bought the majority stake nearly 20 years ago.

BIT's pounds 60m stake in EFM, worth around pounds 185m, is being placed in the market through James Capel and Panmure Gordon. BIT shares rose 25p to 264p on the news.

The pension schemes and BIT are also placing their stakes worth pounds 90m in six EFM investment trusts, which will in effect sever all links with EFM.

EFM will continue to manage a pounds 383m Smaller Companies portfolio for the British Coal pension schemes and the rollover unit trust for minority holders in BIT. And EFM expects to acquire an extra pounds 500m worth of funds this year alone.

Meanwhile, EFM released its results for 1996 showing that while fee income rose by 60 per cent and operating profit by 65 per cent last year, pre-tax profit fell by 2 per cent after shouldering the exceptional costs of the merger with Dunedin Fund Managers.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments