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FI&S doubles funds in £240m R&SA deal

Friends Ivory & Sime has snapped up the fund management business of Royal & Sun Alliance for £240m, creating a major UK investment house with £70bn under management.

The takeover, which will spark a wave of fund consolidation and redundancies among the 700 staff of both companies, will more than double FI&S&#39s £34m of assets under management and put it in the top 10 active fund managers in the UK.

FI&S chief executive Howard Carter says he “pulled out all the stops” to close the deal, believing it will provide a steady platform for further growth — organic or further acquisitions – and boost the company&#39s earnings within a year.

As part of the deal, FI&S becomes the investment manager of the R&SA&#39s UK life and general insurance funds for 10 years but R&SA says this does not prevent it from continuing to seek a buyer for its life and pension arm.

However, analysts believe the FI&S deal will leave R&SA struggling to sell the life and pension business, making it virtually impossible to raise the remaining £550m it requires to bolster its position in the general insurance market.

Carter says: “This transaction is transformational for FI&S in terms of scale, doubling our funds under management and propelling us into the top 10 active investment managers in the UK.”

R&SA group public relations director Steve Clark says: “This is a good start to our disposal programme and the proceeds will be used to support the growth of our general insurance business.”

Cazalet Financial Consulting principal Ned Cazalet says: “This deal will not meet the expectations of R&SA shareholders. If it had been sold two years ago, the whole business would have been worth substantially more.

“Two of the life funds are not in good shape and are not compelling buys, especially now FI&S has the rights to manage them.”

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