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Optimal force

Earlier this month, Iimia MitonOptimal made the surprise acquisition of Liverpool firm Midas Capital Partners, creating what the firms say will be the biggest multi-asset offering inthe market at £2.9bn.

Iimia MitonOptimal will buy Midas for £100.3m,with Midas co-founderSimon Edwards taking onthe role of managing director of the merged business.

The chief executive of Iimia MitonOptimal, Michael Philips, will be chief executive of the new firm.

The acquisition will be paid through Iimia MitonOptimal issuing 27.5m new shares and a cash payment of £59m to Midas shareholders.

Edwards will also pocket around £20m from the deal while the six-year-old firm achieves a market listing.The newly combinedfirm will have a total of 15 fund managers.

The formation of thenew company comes onlysix months after the merger of Iimia and MitonOptimal, with questions of overlapping still open for debate.

Edwards says he and other shareholders will put £20m of personal money intothe group’s offerings.

He says: “It is very important for investors to realise that we still havea personal incentive inthe merged business.

“This has been on the cards for a little while and we feelit is a great deal for those concerned, with the cultures between the two firms representing a good mix. There will be some overlapin funds which will be addressed but it is the next step in offering a well resourced and experienced fund management team.

“We have not finalised what the fund range will look like yet. There is some overlap in the funds on offer but iMO does things slightly different to us so we are very positive on the merger.There willbe no manager departures as a result.”

The group will take on the combined name of Midas Capital but all the iMO funds will retain their brand, says Edwards, and the Midas funds will keep their name.

Edwards says: “It will be business as usual. The benefit of the merger is the combined experience of 15 fund managers and the enhanced sales and distributionit will allow for.”

The merged business is going to have a strong range to sell. Midas’s two open-ended multi-manager funds – balanced income and balanced growth – arefirst and second quartile respectively over three years, having pulled in almost £1.2bn in funds under management between them.

Iimia MitonOptimal also has a tidy performance record with five of the eight funds with a three-year track record, coming first or second quartile in that time.

Edwards says: “At the moment, the combined range, including the investment trusts, comes to 13 and the general feeling is that is that we are probably looking to rationalise with one or two mergers. Something we will belooking at in detail inthe next couple of weeks.”

Plan Invest Group joint managing director Michael Owen says it is an exampleof two strong, proactive offerings looking to continue building their place inthe market.

He says: “It affords whatare two niche players the opportunity to forge a major identity in the market that can compete with the big names and offerings. Economies of scale is an issue that is likely to have been part of the deal but both groups were performing pretty well as individual identities in the first place.”

Hargreaves Lansdown investment manager Ben Yearsley says: “It is likely that this will be the biggest multi-asset offering in the market and it will be a force, provided that all three offerings are brought together correctly, as I expect there arestill a few things being ironed out from the Iimia and MitonOptimal deal. The most important thing to ensureis that the fund managersare happy with what has taken place and do notlook to move elsewhere.”

Many have expected some sort of consolidation inthe multi-manager industry, given the number of new entrants that have joined the marketplace in recent years. This feeling was exacerbated back in March 2005 when Artemis agreed to pull out of the market when it sold its £134mfund of funds offeringto Credit Suisse.

Yearsley says: “Thereis bound to be some consolidation in themulti-manager sector asthe numbers dictate thatnot everyone can survive. Unless you have critical mass of £1bn or the potential to get that much through sales and performance,you are a takeover or merger candidate in some people’s eyes. That may not necessarily be the case here but together the merger creates a pretty big offering.”

Edwards says: “We have taken the opportunity to put together a couple of key players in the specialist market to create a force in this space. This would have gone ahead regardless of market conditions andthe fact that this deal was undertaken when the market has been this volatile indicates how keen both firms have been to seethis through which isa great indicator.”

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