Old Mutual Investment Group (OMIGSA) and Sanlam Investment Holdings in South Africa will acquire the shares of J.P. Morgan Administration Services (JPMAS), formerly known as TASC, from J.P. Morgan. The terms of transaction were not disclosed.
The two asset managers, who are clients of JPMAS, will form a joint venture to acquire the fund administration business. Talks between the parties were reported by Global Custodian in January and follow a strategic review of the business by J.P. Morgan.
J.P Morgan bought the former TASC fund administration business from Sanlam in 2004. At the time of the acquisition, the company had R320 billion of AuA and was the countrys largest independent third party fund administrator. As part of the disposal of TASC, Sanlam agreed to outsource investment administration services to JP Morgan for a period of 10 years. In December 2006 an agreement was reached for the outsourcing of Old Mutual Asset Managements investment administration operations to J.P. Morgans Worldwide Securities Services business.
It is rumored that the growth in AUM at the two asset managers, JPMASs two largest clients, meant that they required a more bespoke solution from the fund services provider.
In an emailed statement, J.P. Morgan said: In late 2011, Worldwide Securities Services (WSS) undertook a strategic review to consider alternative economically sustainable business models for its South African fund servicing business based in Cape Town. This review concluded that the long-term success of the business required a business model that creates value for stakeholders including customers and employees and, ultimately, the shareholders of J.P. Morgan. This solution achieves those goals.
Robert Roux, COO of Sanlam Investment Management, said that following the strategic review of JPMAS, SIM and OMIGSA initiated a rigorous process to acquire the business and were satisfied that they have reached a solution that adequately meets the needs of all parties involved. We are confident of a smooth transition over the coming months, with minimal changes expected, he added.
OMIGSA CEO, Diane Radley said: While investment administration services are critical to an asset manager, as a business operation, it is not a competitive advantage but rather an essential service which should benefit the client by providing reliable and accurate service at the lowest possible cost. As the two key clients of JPMAS, clearly it is in the best interest of OMIGSA and SIM to ensure continuity and quality of service to its clients through this transaction.
The full-service operating model of the business acquired incorporates standard administration services plus tax, accounting, unitisation, net asset value (NAV) pricing and reporting services. The business acquired will continue to provide services to other third party asset managers.
SIMs Roux said the parties hope the transaction will receive approval from the South African Competition Commission in the next two to three months. Following this approval, the transfer of the business is planned to take effect on Sept. 1 2012. Until then, the business will continue to be run by current JPMAS management to transition the business into a stand-alone operation.
The business today has more than 300 employees, with Bloomberg recently reporting it as having $127 billion of assets under administration.
As the business will remain a separate independent servicing entity and the existing service level agreements will remain in place, the operating costs of OMIGSA and SIM will be largely unaffected, said a joint statement from the two asset managers. The service will also continue to be offered to third party asset managers.
Once the deal is in effect, OMIGSA and SIM intend that the business of JPMAS continues to operate as a going concern, from its present location, and as an independent third-party administrator for the SA asset management industry, run by a management team jointly appointed by the acquiring parties.
OMIGSA has AUM of R472bn and SIM has AUM of R328 billion.
(JDC)