Saturday, July 16, 2005

Money managers as targets

In the last month, atleast 3 different companies running funds have been rumored to be targets. The entire group has been depressed for a while, following the bursting of the bubble and the Spitzer market-timing and other investigations. So, it was just a matter of time before some of these, especially the ones that did manage to contain or reverse outflows, became targets.

Janus (JNS) has repeatedly been rumored to be a target, and I believe that it will eventually be bought out. Some of the new fund managers there have been slowly gaining back investor confidence and the oft-mentioned suitor, Franklin Resources (BEN), will definitely go for it once they realize that the recovery is for real. I own a few, bought during the pullback during the earlier investigations and has appreciated substantially since then. It is still worth buying at current prices.

British fund manager, Amvescap (AVZ) was the one with a confirmed bid this month from Canada's CI Financial, but the offer was rejected. Amvescap is most likely holding out for higher / competing bids.
I came close to buying Amvescap a few times, but failed to find a compelling price/signal to buy. Now that a bid is confirmed, the shares are worth buying on a pullback that is likely to occur if no other bids show up soon.

There were also reports about Marsh & McLennan (MMC) going private in a management buyout. I think that is unlikely, given the current market cap of ~$16 billion. MMC may end up selling its Putnam funds business (the original target of Spitzer) and then may go private. I own a few shares, again bought after the investigations were announced. The shares are still worth buying, as a turnaround bet, even if no buyout occurs. The 3% yield is also not something to complain about. MMC also owns Kroll - check this earlier post. Kroll and its other businesses are more predictable income generators and Marsh would be happy to keep just them.

Waddell & Reed (WDR) is also another target. It has mostly resolved the regulatory issues it faced. The insider buying there is a very positive sign and the healthy yield is also a good reason to buy the stock for the long term. I do not own any shares, but am planning to buy soon. The ultimate buyout price is likely to be substantially higher than the current price.


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