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Mutual Fund News

Amvescap appoints financial top gun

New CEO Flanagan seen blocking CI bid

With files from Derek DeCloet

Amvescap PLC, the mutual funds company that is being pursued by Canada's CI Fund Management Inc., reasserted its desire to remain independent by installing a financial heavy hitter as its new chief executive officer.

The British firm last night said Martin (Marty) Flanagan, 45, has replaced Charles Brady, who will continue as chairman. Mr. Flanagan's last job was president and co-CEO of Franklin Templeton Investments of the United States, one of the world's biggest fund managers, with $425-billion (U.S.) in assets.

Amvescap had been looking for a new CEO for some time and evidently accelerated the process when CI made an informal offer in late June to buy Amvescap. The offer was rejected by the board as "inadequate" even though it was thought to have been pitched at a 25-per-cent premium to Amvescap's share price of about £3.25 ($6.92 Canadian) at the time.

Bill Holland, 46, the CEO of Toronto's CI, said he wasn't surprised Amvescap moved quickly to hire a new boss. "I know of Marty Flanagan and he's highly regarded in the mutual funds industry," he said. "I would be grateful to sit down and have a conversation with him, something I was unable to have with the previous management."

The British financial community thinks Mr. Flanagan's arrival can only make Mr. Holland's life more difficult. "Amvescap would not have made this appointment unless it wanted to stay independent and Flanagan would not have taken the job just to sell Amvescap," said an investor in London.

Some Canadian investors had the same interpretation. "This is a high-profile hire at high noon," said Chris Lowe, a portfolio manager at AIC Ltd., which is one of the largest shareholders in both Amvescap and CI. "Clearly, they wanted to hold on to their independence. The reality is this is a strong effort to discount the company being put into play.

"Basically, Mr. Brady and this new gentleman will say, 'Show us your money or shut up because we want to get on with running this business.' "

Paul Kidd, Amvescap's U.S. spokesman, said the company has no interest in a sale. "Our board believes that Amvescap has the resources, global footprint, breadth of products and certainty of new leadership to chart its own destiny," he said.

Amvescap, however, signalled it knows it may be vulnerable by appointing Goldman Sachs Group Inc. and Merrill Lynch & Co. Inc. as financial advisers. CI has no financial adviser but would hire one if it launches a formal offer.

CI, which is 34 per cent owned by Sun Life Financial Inc., has been considering going after Amvescap for at least a year. At one point, it offered to buy Amvescap's Canadian mutual funds unit, Trimark. When that proposal was turned down, CI offered to buy the whole company.

Mr. Holland would not say whether the appointment of Mr. Flanagan increases the chances that CI will launch a hostile bid for Amvescap. Under British takeover rules, the target company is not considered "in play" unless it is presented with a formal offer that is fully financed.

Morgan Stanley said Amvescap would fetch as much as £3.76-billion, equivalent to about $8-billion, in a takeover.

© 2007 The Globe and Mail. All rights reserved.

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