ISIS and F&C join forces to create £120bn fund

FAST-growing UK fund manager ISIS is buying one of the oldest names in the industry, F&C, to create Britain’s fourth biggest asset manager in a deal worth up to £435 million.

ISIS, majority-owned by insurer Friends Provident, is paying 378m upfront to F&C’s owner, Eureka - made up of 250m in cash and 128m in shares in Friends Provident.

The deal, which creates a group with 120 billion in funds under management, leaves Friends Provident with 51 per cent of the enlarged group, which will retain the F&C name, compared with the 67 per cent it owned of Isis.

Howard Carter, the chief executive of ISIS, will take on the same role at the new group. Bob Jenkins, currently the chief executive of F&C, will become non-executive chairman.

Carter said the merger would deliver an annual cost cut of 33m. Some of the savings would inevitably involve an unspecified number of job losses.

Isis employs 500 people, including more than 100 in its Edinburgh operation. F&C also employs about 500, but has no presence in Scotland.

Carter said it would be "unhelpful" to give redundancy figures at this stage, but said "it won’t be marginal. Clearly there will be job reductions, because you cannot reduce the cost-base otherwise".

He added that there were complementary geographic and product strengths to the merger. ISIS gets all its revenues from the UK, whereas F&C only gets 25 per cent of revenues from the UK, being particularly strong as a brand in mainland Europe.

Carter said: "When you get to a certain size [in fund management] there are advantages to being a scale player with broad geographic coverage and a broad range of assets."

The deal allows ISIS to move into the continental European investment market and boosts its profile in the institutional arena. Eureko, which owns all of F&C, will receive 23 per cent of the combined company

Eureko said it may use the cash from the deal to make aquisitions in emerging markets. "There are considerable opportunities that present themselves, including acquisitions ... Emerging markets are always very interesting," a Eureko spokesman said.

Analysts said ISIS’s British retail fund interests will be complemented by F&C’s strength as a manager of institutional and other client business in Europe, such as the Dutch pension market.

The F&C name is retained because it is far better known, dating back to the 19th century when Foreign & Colonial was Britain’s first investment trust.

Friends Provident said it sold 172 million of new shares to help fund the deal at 135p apiece. Friend Provident’s shares closed down nearly 5 per cent to 139p.

Philip Moore, finance director of Friends Provident, said: "Our strategy is to get our asset management business into the top five positions and this gets us into the top four. So control was a strategic requirement, we wouldn’t have done this deal without control."