Schroders spent months earlier this year planning a potential buyout of UK wealth manager M&G.
The plan was eventually abandoned on valuation grounds, discussion sources told Bloomberg after M & G’s share price slipped from a low of 209p to 217p.
A proposal drawn up in collaboration with an undisclosed partner would have resulted in Schroders – already the UK’s largest specialist manager with assets of $ 672 billion. However, the discussion never led to a formal approach.
M&G, which at the time of its most recent trade update, had assets of $ 367.2 billion.
The asset manager reported an outflow of 12.1 billion of redemptions at the end of 2019.
The outflows contributed to a 30% drop in earnings from £ 1.14 billion a year ago to £ 788 million. Fee-based revenue fell 4% to £ 988m after retail margins came under pressure.
The fund house increased its dividend for the full year by 2.6%, adding to its share price, which previously traded at a yield of 9% but is still trading below the 220 pence at which it was trading.
The merger would have created a global top 20 asset manager and the largest fund house in Great Britain, which Legal & General would have narrowly ousted.
Any deal would also have been a sharp break with Schroders’ recent acquisition strategy under CEO Peter Harrison, which in recent years had focused on small bolt-on deals for specialty stores.
The source said Bloomberg that the Schroders executives were particularly interested in M & G’s Asian sales network, which would have given them crucial access to the region.
Neither Schroders nor M&G have their own mutual funds in the US.
In 2016, Hartford Funds acquired Schroders’ 10 mutual funds, which at the time had total assets of $ 2.2 billion, with Schroders becoming their sub-advisor. The company also advises several funds for Vanguard, including the Vanguard International Explorer Fund of $ 2.8 billion.
M&G has historical ties to Jackson Financial as both companies were at times part of UK insurer Prudential Plc. However, over the past three years this has changed due to a series of mergers and divisions. M&G went public as an independent company in 2019, while it was announced in January this year that Prudential Plc is also spinning off Jackson Financial to focus on its Asian insurance business.
M&G was previously a sub-advisor to three Vanguard funds, including the International Growth Fund, as well as a commodities fund and an emerging markets strategy, but was eliminated from those funds in 2016 and 2019.
Prudential Plc is not affiliated with Prudential Financial, which is based in New Jersey.
Additional reporting by Alex Steger