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The future of Australia's mid-sized funds managers is again in a state of
flux, amid talk yesterday that protracted sale negotiations for London-based
Royal & Sun Alliance's Australian financial services operations have hit a brick
wall.
Australasian life insurer Tower had been the front-runner in long-running
talks to buy the operations, freeing capital for the UK-based life and general
insurance group. But it is understood the sale of the operations, including fund
manager Tyndall and RSA's life and master trust businesses, will not proceed.
Failure to proceed with the deal puts another cloud over the future of Tower,
which is still to locate a permanent chief executive and has found it difficult
to convince its shareholders to support such a large strategic move.
It also comes at a time when the value of funds management groups has dipped
in line with weak markets calling into question the aggressive moves by banks
to buy wealth management businesses.
One possible outcome of the deal was that Royal & Sun's senior Australian
executives, including chief executive Michael Wilkins, or head of financial
services Dennis Fox, would run the combined entity.
Mr Fox yesterday declined to comment on market speculation but said: ``We are
looking at methods in which the parent can get some capital."
While it was a tough market and there was uncertainty about ``who owns
what", the group was confident it would see improved wholesale and retail
inflows to its products, Mr Fox said.
Tyndall, with about $5 billion in funds under management, has been strongly
recovering its managed fund investment performance in the past two years and has
been regularly placed among the top three share funds by returns. But it has
struggled to attract inflows because of the legacy of earlier years of
under-performance.
The possibility of a takeover by Tower or another player has also left many
investors unwilling to commit money because of the prospect that Tyndall's deep
value- based style could be altered.
Still, last month Tyndall clawed back some support from research houses, when
Lonsdale Securities recommended the group's managed funds, citing its improved
investment process under head of Australian equities Bob Van Munster.
Tower appeared to have been able to come up with a self-funding mechanism for
the purchase by securitising parts of the Royal & Sun life operations,
substantially reducing the purchase price from original indications of around $1
billion.
Tower's share price had come under pressure from weak investment markets and
concern that it would have to raise equity capital from investors. Yesterday it
rose 10c to $3.10.
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