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Old Mutual’s wealth arm buys UK’s Quilter Cheviot-Reuters

(Reuters) – Financial services group Old Mutual‘s wealth arm said on Friday it would buy money manager Quilter Cheviot from European private equity house Bridgepoint, strengthening its focus on richer customers.

The 585 million pound ($941 million) purchase brings Old Mutual Wealth’s assets under management to 92 billion pounds ($148 billion), a rise of more than 20 percent.

The purchase will increase Old Mutual’s exposure to the lucrative wealth management market, which is forecast to grow by between 6 and 8 percent a year. Britain’s affluent population represents around 55 percent, or 1.7 trillion pounds, of the country’s wealth market, the company said.

The deal would enable Old Mutual to offer investment management services to clients with more than 1 million pounds to invest, Old Mutual CEO Julian Roberts told Reuters, adding to existing “affluent” customers, who have at least 50,000 pounds.

“What Quilter does is to take us into the high net worth (clients)”, Roberts said. “We are not at the mass market level.”

Old Mutual paid for the company with the proceeds of the sale of some European businesses and the U.S. initial public offering of OM Asset Management, which closed this week.

The deal price for Quilter Cheviot includes 42 million pounds of deferred equity, contingent on the performance of the business, the company said.
Old Mutual said it aimed to achieve annual cost savings of 15 million pounds by 2017.

Bridgepoint achieved an internal rate of return of 55 percent from the sale of Quilter Cheviot, a source familiar with the deal said.

Analysts said the deal price, representing 3.6 percent of Quilter Cheviot’s assets under management, compared well with similar transactions such as U.S.-owned Franklin Templeton Global Investors’ purchase of British firm Rensburg Fund Management in 2011, which came in at more than 5 percent of AUM.

“This is a smart, well-priced deal for Old Mutual,” said Eamonn Flanagan, analyst at Shore Capital, in a client note, reiterating his hold recommendation on the stock.

Flanagan added Old Mutual “is starting to look very attractive once the current volatility in investment and forex markets settles down”.

The company’s shares rose 1.2 percent to 171.6 pence by 1040 GMT.

Old Mutual said the deal likely represented an end to its acquisition activity in Britain.

But Roberts reiterated that the firm has expansion plans in sub-Saharan Africa, where it has so far spent 700 million rand ($63 million) of a 5 billion rand investment programme.

“We want to build our business in Nigeria, Kenya and Ghana, we want to be a major player in those markets, both through organic and inorganic growth,” he said.