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Old Mutual offloads funds business to private equity giant for $680m

Old Mutual offloads funds business to private equity giant for $680m

Old Mutual Wealth has sold its Old Mutual Global Investors (OMGI) funds business to private equity giant TA Associates for a total consideration of £600 million ($678 million).

The deal is expected to be completed as soon as 1 January 2018, with £570 million ($644 million) as an upfront payment and a further £30 million ($34 million) payable between 2019 and 2021 ‘as surplus capital is released’.

OMGI chief executive Richard Buxton (pictured below) said: ‘I believe this is a good outcome for our customers and our staff.

‘The management team is delighted to be partnering with Boston-based TA Associates to buy the single strategy business.’

Old Mutual Wealth (OMW) is due to be spun out of its South African parent group into a standalone, FTSE 100 diversified financial service group next year. 

In a mammoth, four-hour presentation last month, the company detailed why it saw the funds business as sufficiently different to justify a sale, although it will retain a multi-asset fund unit.

OMGI currently runs £25.7 billion ($29 billion), primarily in high-conviction equity mandates. Once the sale is completed the remaining wealth business will run £106 billion ($119 billion) in client assets.

OMW chief executive Paul Feeney added: ‘As we outlined in the Showcase event in November, the single strategy business is less closely aligned to our goal of becoming the UK's leading wealth manager.

‘I believe this development is a good outcome for our shareholders and provides the single strategy team with a great opportunity to build on the success they have achieved since 2012.’

Other bidders for the business included two Australian financial services groups, Challenger and Macquarie Investment Management.

In March 2016, the South African insurer announced a plan to split itself into four separate businesses including Old Mutual Wealth, Old Mutual Emerging Markets, Nedbank and OM Asset Management (US), into four distinct entities.

In May this year it sold its majority stake in its US asset management arm, OM Asset Management, to Chinese firm HNA Capital for $446 million. Following the transaction, it’s 50.8% share was reduced to 25.9%.

After the IPO of OMW, all that will be left is its emerging market insurance and solutions business and a stake in Nedbank, a South African bank.

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