The £25.7bn single-strategy business spun out from Old Mutual Global Investors' (OMGI) and sold to senior management, including chief executive Richard Buxton, and TA Associates will be capitalised to "attract new investment desks and fund managers", while Buxton will also remain as manager of the £2.3bn UK Alpha fund.
Parent firm Old Mutual Wealth confirmed this morning the single-strategy business will be sold in a £600m deal with TA Associates paying £570m in cash on or before completion and a further estimated £30m, which will be paid primarily between 2019 to 2021, as surplus capital associated with the separation from Old Mutual Wealth is released from the business.
The firm said the majority of the current OMGI single strategy management team will remain with the single-strategy business, with Buxton retaining his role as CEO, head of equities and fund manager, while a spokesperson also told Investment Week: "OMGI will be strongly capitalised as an independent organisation, with greater capability to attract new investment desks/ fund managers."
Following this morning's announcement shares in Old Mutual climbed to be the highest riser on the FTSE 100, up 4% to trade at 221p.
Paul Feeney, CEO of Old Mutual Wealth, said while the single-strategy business was "less aligned" with Old Mutual Wealth's plans to become a leading wealth manager, the new firm would continue to have ties with Old Mutual Wealth.
He said: "Old Mutual Wealth is focused on becoming the UK's leading wealth management business. It has a full service model offering financial advice, investment solutions and platform services in the UK and internationally.
"The multi-asset business is a core part of this strategy.
"The single-strategy business is less aligned and targets a different market segment, with OMW focused on retail and the single-strategy business focused on wholesale and institutional.
"However, the single strategy business will continue to be a partner of Old Mutual Wealth."
In the statement released this morning it said once the transaction completes, economic ownership of the single-strategy business will pass to the acquirer effective from 1 January 2018, with all profits and performance fees generated up until 31 December 2017 for the account of Old Mutual Wealth.
The proposed transaction is subject to closing conditions, including regulatory approvals and conditions relating to the transfer of the multi-asset business to be retained by Old Mutual Wealth.
A number of operational and IT transitional service agreements have also been agreed for a period of up to two years from the date of the completion of the sale (covering the separation of the retained multi-asset business from the single strategy business).
Buxton commented on the sale: "The management team is delighted to be partnering with TA Associates to buy the single strategy business. I believe this is a good outcome for our customers and our staff."
Feeney added: "Ahead of our managed separation and proposed listing in 2018, we are pleased that we have completed the strategic review of the single strategy business and agreed terms for a transaction with TA Associates.
"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."
Chris Parkin, a managing director at TA Associates, said: "We have followed the development of Old Mutual Global Investors' single strategy business for several years and have been impressed by what is clearly now a diversified and high-quality investment platform.
"In particular, the well-regarded fund management teams have worked diligently to develop and deliver tailored investment solutions focused on the needs of their customers, with the goal of producing positive long-term outcomes. It is an honour to partner with the single strategy business and we look forward to working closely with the entire team to help further scale the company."
The announcement comes days after Sky News reported Buxton was on the brink of a deal to buy out the single-strategy business as the parent firm continues its 'managed separation'.
It was previously reported two Australian financial giants Challenger and Macquarie Investment Management were in a bidding war for the business but Sky sources said private equity firm TA Associates, which supported Jupiter's management buyout from Commerzbank in 2007, will be named backer.
The sale of OMGI is part of a managed separation of the Old Mutual business into four separate entities, but will not include the £16bn multi-asset part of the fund management arm, which was split out from OMGI last month.
The four parts of Old Mutual to be spun out as separate entities are South African lender Nedbank; a US-based fund management business, in which Old Mutual's stake will be reduced to 6% later this year; Old Mutual Wealth, of which OMGI is part; and Old Mutual Emerging Markets.
In September, it was revealed Buxton was trying to assemble a buyout of its single-strategy operations, which prompted confirmation from Old Mutual that it was "assessing, together with OMGI management, internal and external structures" for the business.
Feeney said he was planning to carve out the £16bn multi-asset business from its fund management operations, while the single-strategy range was "less aligned with the Old Mutual Wealth model".
"While assets under management and profits are growing strongly, it is reliant on the wholesale and institutional market," he said.
"Only 20% of its assets under management come from the relationship with Old Mutual Wealth, which is why we will position it as a single and distinct part of the business."
Old Mutual Wealth announced last month it will operate using the Quilter brand following the separation from its parent company next year, with the business to be re-segmented into two divisions: ‘Advice and Wealth Management' and ‘Wealth Platforms'. The group said it remains on track to list as early as possible in 2018, subject to regulatory and other approvals.
Buxton joined OMGI as head of UK equities in June 2013, and was appointed as chief executive in August 2015. He was previously at Schroders, where he managed the UK Alpha Plus fund for over ten years. Prior to Schroders he spent more than a decade at Baring Asset Management, having started his investment career in 1985 at Brown Shipley Asset Management.
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