F&C Asset Management has agreed plans to merge its property business with Leo Noe and Ivor Smith’s Reit Asset Management.
The new company will be rebranded F&C REIT Asset Management and will combine the two companies' more than £8.5bn of assets under management.
F&C will be the majority owner of the company with a 70% interest and Reit’s owners will have a 30% ownership interest. F&C will pay REIT £25m in cash and a further £35m in loan notes. F&Csaid that subject to F&C REIT Asset Management meeting certain earnings before interest, tax and depreciation (EDIDTA) performance targets Reit’s ownership interest could increase up to 40% over the period to 31 December 2014.
Leo Noe will become executive chairman of F&C Reit Asset Management, and F&C's Nick Criticos will be chief executive. Ivor Smith will be an executive member.
Shareholder approval needed
The deal needs shareholder approval at a shareholder meeting in September this year. Shareholders Friends Provident and Eureko have irrevocably agreed to vote in favour of the deal.
F&C said the benefits of the deal was merging £8.5bn of assets under management with Reit’s strong investment track record, entrepreneurial approach and geographic diversity and F&C’s strong investment track record, fund management skills and distribution network.
New products to be launched
The combined company plans to launch a range of new products including a European fund within the next year which it said will benefit from ‘synergies from increased scale’.
Reit has an international property portfolio of assets in the UK, Europe, Israel and India. The board of F&C said it expects the deal to be earnings enhancing for the first full year after completion of the deal.
Multi-specialist business model
Alain Grisay, chief executive of F&C, said: ‘This transaction is consistent with the development of our multi-specialist business model and the strategic direction of our three year plan. It will increase our geographic scope, widen our product range and deepen our expertise in property asset management which is a core long term asset class for our clients. The combination should be significantly value enhancing for our shareholders.’
Leo Noé, chairman of REIT and proposed executive chairman of F&C REIT, said: ‘This combination will be transformational for both businesses. Our skills, strengths and mind set complement each other superbly. We see great potential for value creation in the combined organisation from bringing together the two businesses.’
Fenchurch Advisory Partners is acting as exclusive financial adviser to F&C in relation to the deal.