Gerrard goes to Barclays in £210m deal

Katherine Griffiths
Tuesday 28 October 2003 01:00

Barclays has snapped up Gerrard, the private client wealth manager, from South Africa's Old Mutual for £210m, a deal that makes the bank the UK's largest financial adviser to well-healed investors.

The country's third-largest bank said yesterday's deal expanded its presence in the lucrative private client sector.

But the City was disappointed by a separate acquisition across the Atlantic, where Bank of America's takeover of Fleet Boston appeared to wipe out the possibility that the US giant would move on Barclays.

Barclays' shares dipped 10.25p to 495.5p after the American tie-up was confirmed. It ended weeks of speculation that Bank of America would follow up talks it has held with Barclays with a concrete offer.

Barclays said the acquisition of Gerrard, in cash, advanced its strategy to build a major wealth management business. The private client division was the only unit of Barclays to see falling profits in the first half of the year.

Gerrard will be combined with Barclays Investment Management, part of Barclays Private Clients, to create the UK's largest private client investment manager, with £21.4bn of assets under management.

Naguib Kheraj, the chief executive of Barclays Private Clients, said Gerrard would give Barclays greater economies of scale and additional expertise.

The disposal is one of a series made by the London-listed financial services group Old Mutual, even though the company has said it wanted to enlarge its presence in the UK.

Analysts said the deal was not evidence that the insurer was losing interest in Britain, but rather that Gerrard had never been a good strategic fit.

Old Mutual paid £525m for Gerrard in 2000 and has struggled to make the operation profitable. The group has sold off parts of the operation, including the derivatives broking house GNI.

In common with most stockbrokers and fund managers, Gerrard has been hampered by the adverse business environment in the past few years, and has also lost several key staff. In the year to 30 June, the business made a profit of £3m from revenues of £100m.

Roman Cizdyn, an analyst at Commerzbank, said the disposal of Gerrard might give Old Mutual the firepower to make a more strategically sound acquisition, such as part of the AMP empire, which is being broken up.

The Australian insurance giant AMP owns the fund manager Henderson. Old Mutual has also been linked with the troubled insurer Britannic.

The group has said it wants to derive one-third of its business from South Africa, one-third from the US and one-third from the UK.

A Barclays spokeswoman said the company would examine possible cost-savings from the deal, but that the bank did not expect to make any large-scale job cuts.

The Bank of America buy of Fleet Boston, in an all-share deal worth about $47bn (£28bn), will see it overtake JP Morgan as the second-largest US bank. The group will also become the largest consumer bank in the US.

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