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T Rowe Price to buy 26% in UTI AMC for $135 mn

US-BASED global investment management firm T Rowe Price is set to pick up a 26% stake in UTI Asset Management Company (UTI AMC) for $135 million (around Rs 650 crore). This sum works out to 3.6% of assets managed by UTI AMC as on August 31, 2009.
“An in-principle approval from all shareholders has already come in and legal documents have been drafted. The agreement will be signed shortly,” said a senior official at one of the four promoter institutions. UTI MF’s four stake holders are SBI, LIC, Bank of Baroda and Punjab National Bank. The stake sale was initiated in March this year, and the bidding process completed in July, with UTI AMC selecting T Rowe Price over other bidders. According to an official involved with the deal, T Rowe Price will also be investing in UTI’s venture capital company and also in its private equity fund.

Total assets managed by the T Rowe Price group of companies world-wide stood at $269 billion as on March 31, 2009. The NYSE-listed firm manages a broad array of financial products, including mutual funds and retirement funds, for individual and institutional investors. Currently, all four existing partners hold 25% equity each in the fund. Under the proposed deal, each stakeholder will sell 6.5%. Following the deal, the UTI MF board will be reconstituted. All shareholders, including T Rowe Price, will have an equal representation.

According to one person with detailed knowledge of the sale process, T Rowe Price’s bid was marginally higher than those made by Schroders Investment Management and Vanguard, the other two players who were in the fray. UTI AMC will be able to access T Rowe Price’s fund management and research expertise. Besides, it can leverage on T Rowe Price’s relations with several leading global banks. T Rowe Price already holds stakes in several Indian firms, and henceforth, most of its India investments will be managed by UTI Mutual Fund.

UTI MF posted a net profit of Rs 147 crore for the year ended March 31, 2008, the highest among all local fund houses in absolute terms. Though, no longer, the number one among Indian fund houses, it still remains the most profitable, because of a higher proportion of equity assets — around 22% of the total — compared with rivals.

In July this year, Nomura, the Japanese financial major, had picked up a 35% stake in LIC Mutual Fund for a little over Rs 300 crore, valuing the fund house at slightly less than 3% of its total assets under management. Last week, L&T Finance bought DBS Chola Asset Management for Rs 45 crore or 1.5% of the assets under management.

Source: Economic Times

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