Isis and F&C get together in £378m deal

Friends Provident, the UK life assurer, yesterday announced plans to buy a majority stake in F&C Management, the UK's largest investment trust manager, and to merge the company with Isis Asset Management, the London-listed fund manager in which Friends owns a 67 per cent stake.

The newly formed company will be the UK's fourth-largest investment manager with combined assets of £120bn, and will be rebranded under the F&C name. The Isis brand, which replaced the Friends Ivory & Sime name just two years ago, will be phased out.

The complicated deal will be initiated by a new issue of 331 million Isis shares, of which 186 million will be paid to Eureko, F&C's Dutch parent, with the remainder taken by Friends Provident.

Friends Provident will then pay a total of £378m to Eureko, of which £250m will be in cash, with a further £128m paid by a new issue of Friends Provident shares. Once the deal is complete, Friends Provident will be left with a majority 51 per cent in the enlarged company, while Eureko will have a 23 per cent stake. The remaining 26 per cent will continue to be freely floated on the London market.

Isis's shares were suspended yesterday at 199p, with trading expected to resume in the stock next month. The deal, which is subject to regulatory approval, is then expected to complete in either September or October.

The new company will be headed by Isis's and F&C's current chief executives Howard Carter and Rob Jenkins, with Mr Carter taking the position of CEO in the new company, and Mr Jenkins assuming the role of non-executive chairman.

In a statement, Isis said the merger would create cost-savings of £33m a year - some 20 per cent of the combined group's current total cost-base. It said that most of these savings would come from job cuts within the group, but was unable to put a figure on how many would be axed.

Nick Criticos, Isis's head of retail and investment trusts, said the deal had appealed to the company because it gave it greater market share in the UK as well as exposure in Europe. "We've said in the past that we want to be a top five asset manager in the UK, and we always said we needed to get there through a transaction," he said. "This gives us an opportunity to go into the top five in the UK and get a pan-European footprint.

"F&C are very big in the institutional market, whereas we at Isis have a growing retail presence in the UK, and we both have a strong presence in investment trusts - put that together and the fit is very neat."