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Principal to buy out Sun F&C schemes

BS Markets Bureau in Mumbai | July 02, 2003 13:57 IST

Adding to the string of recent high-profile mergers and acquisitions in the mutual fund industry, Principal Mutual Fund on Tuesday said it had "reached an agreement" to buy out Sun F&C Mutual Fund in India.

Sun F&C has assets of Rs 500 crore (Rs 5 billion) in its seven schemes and a customer base of around 70,000 investors. Principal has an investor base of 160,000 and an asset base of Rs 2,000 crore (Rs 20 billion).

Principal Mutual Fund, which recently bought out its Indian partner IDBI in IDBI-Principal, is looking to further strengthen its position in the domestic mutual fund sector.

Sources familiar with the development said in line with valuations in recent deals, the Principal-Sun F&C deal might be in the range of Rs 20-25 crore (Rs 200-250 million).

In June 2003, HDFC Mutual Fund completed the acquisition of Zurich India MF for Rs 148 crore (Rs 1.48 billion), which translated into a price close to 4.5 per cent of the latter's assets.

In the first quarter of the year, Alliance Capital Mutual Fund had almost sold out before the fund house revised its view on the Indian markets.

In March 2002, Franklin Templeton acquired Pioneer ITI for almost $50 million, and in February 2002 Sundaram Finance bought out Newton Investment Management's 39 per cent stake in their joint venture Sundaram-Newton.

Principal's managing director and chief executive officer, Sanjay Sachdev, said the two sides had been negotiating for the past three to four weeks. Applications for the necessary approvals were filed with the Securities and Exchange Board of India on Tuesday.

Sachdev said, "It's a good switch," and pointed out that the acquisition would result in Principal having a decent fund size in India.

Sun has three equity schemes, three debt schemes and a balanced fund. Sachdev added that it was possible to merge the schemes of the two fund houses in case there was an overlap in investment objectives.

Industry sources said Sun F&C was selling off its business since it was not making any significant headway in the Indian asset management segment. Nikhil Khattau, CEO of Sun F&C, was not available for comment.

However, in a press release, Khattau said: "We have entered this transaction with an aim to serve the interests of our trusted unit holders and to maintain continuity in their investments. Sun F&C and its sponsors believe that the global expertise of the Principal Financial Group should indeed benefit our unit holders in the short, medium and long terms."

Deal Street chronology

  • April 2001:- Tata MF acquires three schemes of Indian Bank MF
  • June 2001:- Cholamandalam Finance buys out its 49 per cent partner Cazenove Holdings
  • Feb 2002:- Sundaram Finance buys out its 39 per cent partner Newton Investment Mgt
  • March 2002:- Franklin Templeton announced acquisition of Pioneer ITI
  • March 2002:- Credit Capital acquires two schemes of BoI MF
  • June 2002:- SUN F&C acquires two Jardine Fleming's schemes
  • June 2003:- HDFC MF completed buyout of Zurich MF
  • July 2003:- Principal MF announced acquisition of Sun F&C MF's schemes

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