Old Mutual has confirmed the sale of OMGI for £600m, the latest step in its managed separation.
OMGI chief executive Richard Buxton and the senior management team will partner with private equity house TA Associates to buy the single strategy asset management business, which manages £25.7bn.
The deal sees the single strategy business separate from Old Mutual Wealth’s multi-asset business.
The sale involves total cash consideration of £570m with an additional £30m payable on the release of surplus capital associated with the separation from Old Mutual Wealth.
Old Mutual, the Anglo-American holding company of Old Mutual Wealth, will use proceeds from the sale for general corporate purposes.
A number of operational and IT transitional service agreements have also been agreed for a period of up to two years from completion.
Old Mutual says the majority of OMGI’s senior management team will remain with the business and Buxton says the deal is a good outcome for customers and staff.
TA Associates says they will work with Buxton and his team to further scale the funds business.
Managing director at TA Associates Chris Parkin says: “We have followed the development of Old Mutual Global Investors’ single strategy business for several years and have been impressed by what is clearly now a diversified and high-quality investment platform.
“In particular, the well-regarded fund management teams have worked diligently to develop and deliver tailored investment solutions focused on the needs of their customers, with the goal of producing positive long-term outcomes.”
TA Associates backed a similar deal in 2007 when Jupiter separated from Commerzbank in a management buyout.
OMGI’s single strategy business enjoyed net inflows of £3.5bn in the nine months to 30 September and operating profits for the half year to 30 June were £36m, with £17m of those performance fee related.
Old Mutual Wealth chief executive Paul Feeney says: “The single strategy business is less closely aligned to our goal of becoming the UK’s leading wealth manager.
“I believe this development is a good outcome for our shareholders and provides the single strategy team with a great opportunity to build on the success they have achieved since 2012.”
OMGI’s sale will be effective from 1 January, leaving Old Mutual with wealth management business Old Mutual Wealth, South African banking giant Nedbank and sub-Saharan financial services business Old Mutual Emerging Markets.
It has already listed US institutional asset manager Old Mutual Asset Management.
All will become independent entities by the end of 2018 under Old Mutual’s managed separation.
Old Mutual Wealth, which excluding the single strategy business has £106.6bn funds under management, will be rebranded as Quilter over the next two years and its multi-asset business will become Quilter Investors. Old Mutual is planning to list the business in 2018.