Signet Banking Corp. joined the mutual fund acquisition frenzy on Wednesday, announcing a deal to buy a small fund family with an outsize reputation for marketing prowess.
By acquiring the companies that manage and distribute the Blanchard Funds, Signet will bring its mutual fund assets to $2 billion - double the current level. Terms of the deal, which is expected to close in the second quarter, were not disclosed.
The purchase would raise the rank of Signet, a $12 billion-asset banking company based in Richmond, Va., to 36th from 60th among bank mutual fund managers, according to Lipper Analytical Services, Summit, N.J.
Industry observers said the deal is clearly more significant for its potential synergies than for its size.
Sheffield Management Co., which manages the Blanchard family, and Sheffield Investments Corp., the distributor, are known for their direct- marketing expertise. And Signet is renowned for its micromarketing abilities, a talent honed largely through a credit card business that it recently spun off.
"Sheffield's skill in list management and our skill in information-based marketing to consumers is a very powerful combination," said Leslie P. Hunter, Signet's executive vice president for private banking, trust, and financial services.
Banking analysts said the deal appears to complement Signet's plans to expand in nontraditional, fee-income-producing businesses.
The company has identified mutual fund sales, asset management, and home equity lending as priorities, said Moshe Orenbuch, analyst with Sanford Bernstein & Co. in New York.
"They're all businesses that can be distributed without relying on a branch network," Mr. Orenbuch said.
Merrill Ross, a bank analyst with Wheat First Securities in Richmond, Va., praised the acquisition as "a very nice fit." She said it significantly accelerates Signet's plan to "develop a product platform that can sold through direct mail."
The Blanchard Funds have experienced some setbacks recently. Assets in the 11 portfolios have shrunk from $1.7 billion in December 1993 to $1 billion today, according to Lipper.
But Avi Nachmany, a partner with Strategic Insight, a fund consulting firm in New York, said the Blanchard Funds have fared exceptionally well in the highly competitive no-load mutual fund business. Most of the outflows, he said, were from a global bond fund and a strategic income fund that had grown dramatically in recent years.
"The kinds of investment strategies these funds had were not so successful last year, so some of the assets that came in went out," Mr. Nachmany said. "But fundamentally, Signet is buying a very strong talent."
"They're not buying the assets," he added. "They're buying the expertise."
Industry observers estimated that Signet would pay $16 million to $25 million for the Sheffield companies. Such entities usually fetch the equivalent of 2% to 4% of assets under management, or 1.5 to 3 times revenues. Sheffield Management and Sheffield Investments booked $17 million in revenues last year.
- Karen Talley contributed to this article
