CI Fund Management Inc. will become Canada's largest mutual fund company if it succeeds with its audacious plan to buy troubled British investment giant Amvescap PLC.
The purchase would cap a string of acquisitions by CI president and chief executive officer Bill Holland, who has long coveted Amvescap's assets, especially successful Toronto-based AIM Funds Management Inc., best known for the AIM and Trimark fund brands. If CI's estimated $7-billion bid wins, the company's assets under management in Canada would swell to about $90-billion, surpassing No. 1 rival IGM Financial Inc.'s $87-billion.
"We have indeed expressed interest in purchasing Amvescap, which we believe would be a strategically sound investment for CI," Mr. Holland confirmed yesterday.
In a brief statement yesterday, London-based Amvescap confirmed an "unsolicited indicative approach" from CI that it said is not in the best interests of shareholders. Amvescap said its board of directors doubts CI has the ability to make a firm offer for the entire company.
Amvescap officials in Atlanta declined to comment further.
Mr. Holland, the fund industry's most acquisitive CEO, has concluded about eight deals over the past 10 years, including the 2003 purchase of Assante Corp. of Winnipeg for $887-million.
Amvescap has been reluctant to sell off its Canadian assets but the entire company is now officially in play. Poor fund performance and regulatory issues in the United States have decimated the company's stock market value in recent years.
There is "no issue at all" regarding financing the deal, Mr. Holland said. Investment bankers concurred, saying there is little doubt that CI can put in place the necessary financing to make a serious bid.
But there may be a spoiler waiting in the wings. IGM, the mutual fund arm of Montreal's Power Corp, of Canada, is widely regarded as the company most likely to derail CI's plans for Canadian domination by bidding on Amvescap's Canadian assets.
The Desmarais family, Power's controlling shareholders, snatched up Mackenzie Financial for $4.15-billion four years ago, besting rival bids from CI and AIC Ltd.
CI's gambit is likely to be a long and potentially hostile game for widely held Amvescap and its assets, several sources said. Mr. Holland declined to confirm if and when a formal offer for Amvescap will be made.
"It looks like there is a bit of gamesmanship going on," said John Aiken, an analyst at National Bank Financial Inc. He gives CI "better than even odds" at winning the fight for Amvescap but added that it's "far from a slam dunk."
Analysts and investors outlined an array of scenarios yesterday as to how CI might pursue Amvescap. Some suggested that CI would simply fold Canada's AIM Funds into its own operations and then auction U.S., British and international operations to the highest bidder.
Others see the U.S. business as a logical fit for Massachusetts Financial Services Co., or MFS, the Boston-based mutual fund subsidiary of Sun Life Financial Inc.Amvescap's U.S. retail mutual fund business would provide MFS with more assets and a wider distribution network across the United States.
Donald Stewart, chief executive officer of Sun Life, which also owns a 34-per-cent interest in CI, declined to comment on the Amvescap offer, but left little doubt the insurer would provide financial backing to help clinch the deal.
"In any business proposition that CI engages in that we think makes sense . . . then we would seek to be supportive both in people and financial terms," he said yesterday.
The shares of Amvescap rose 15 per cent yesterday, up 52 pence to £3.95 ($8.55) on the London Stock Exchange. About 62 million shares were traded, almost 10 times the stock's average daily volume of about 7.4 million shares. On the Toronto Stock Exchange, CI's shares fell 23 cents to $18.
© 2007 The Globe and Mail. All rights reserved.
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