Low cost index products, better solutions for clients managing escalating pension liabilities, and a potential IPO, are all on the wish-list for the merged asset management businesses of Crédit Agricole (CAAM) and Société Générale (SGAM), a deal due for completion in the second half of this year.
Ownership of the new funds group, which will have total assets under management of €638bn, is to be split 70 per cent in favour of Crédit Agricole, the remainder controlled by Société Générale. The combined deal means it will be the fourth largest asset manager in Europe and the ninth globally, and is expected to result in cost savings of €120m by 2012.
Georges Pauget, chief executive of Crédit Agricole, said the tie-up makes sense against the backdrop of a volatile market. “Given the rapidly evolving financial services sector landscape, banks have to review their business models. The agreement we have signed is based on industrial logic, seeking to combine production efficiency with the power of distribution,” he said.
He added CAAM had so far weathered the storm and was well-prepared for expansion, once the merger is complete. “In the recent period of market turbulence, our asset management business has demonstrated its resilience. As the market stabilises over time, we believe it has the capacity for further development and contribution to group results.”
The merged group would also consider an IPO within five years in order to attract partners and potentially finance further acquisitions.
Though SGAM will have the final say on vice-chairman and appoint one third of directors of the new board, the chairman will be a CAAM appointment. Yves Perrier, currently CEO of CAAM, will become the CEO of the combined business.
The development of products and solutions for institutional clients through a wider distribution network - not just in the core French markets but the US, Eastern Europe, and Asia - is also high on the agenda for the merged group, Mr Perrier added.
The institutional client base represents around a third of the new group’s business, the rest comes from the parent banks’ estimated 35m individual clients in France.
“Our product areas will be reinforced in global fixed income, Japanese equities, and US dollar fixed income (and) benefiting from improved alpha as a result of the merger,” he said. “We will develop low cost index products and offer solutions to international clients managing pension liabilities.”
Mr Perrier also stressed that the merger will support ambitions to develop the funds businesses abroad in areas such as emerging markets and absolute return products.
Jean Pierre Mustier, head of asset management at Société Générale, said the combined group would be a “multi specialist” for its institutional client base. “We believe the networks of Société Générale both in France and abroad will find that the new entity is even better positioned to serve their institutional and retail clients even more efficiently.”
It is expected that SGAM will retain control of some specialised fund units and Lyxor Asset Management, the ETF and alternatives manager.
