NationsBank Corp. saw an opportunity, and decided not to take it.
The Charlotte, N.C., banking company had an option to buy a 25% stake in Gartmore PLC, a London-based institutional money manager. Indeed, the U.S. bank was viewed as a possible bidder for the entire company.
But Monday, National Westminster Bank PLC in London announced its purchase of Gartmore for $713 million. The deal calls for Gartmore management to stay in place and run Natwest's worldwide asset management business.
NationsBank passed on Gartmore after being assured that new ownership would not adversely affect a joint venture the bank has with the money management firm.
While U.S. banks have bought their way into the money management business in recent years, some banks have decided these assets are too expensive.
But the existence of Nations Gartmore, a joint venture between NationsBank and Gartmore formed last year, at least gives the North Carolina bank the ability to sell international money management products to U.S. investors without having to acquire a firm.
To assure that it would have a voice in who would run Gartmore, NationsBank had an option, as part of the joint venture agreement, to buy up to 25.1% of the firm if majority owner Banque Indosuez were to sell.
"We're very pleased to have a prestigious owner, the Gartmore professionals in place, and the joint venture undisturbed," said James B. Sommers, president of NationsBank Trust and Investment Management.
Natwest, according to Mr. Sommers, desired complete ownership of Gartmore, and "that suited us just fine."
But NationsBank was compensated by Banque Indosuez for not exercising its option, according to Mr. Sommers. He wouldn't disclose how much his bank received.
As part of its effort to consolidate its investment management operations under the Gartmore roof, Natwest will transfer $49 billion of assets currently managed by Natwest Asset Management to the newly acquired money manager.
The combined entity will manage $85 billion of assets.
"It's almost a reverse merger in which the assets of Natwest are being handed over to Gartmore to run," said Charles G. Smith 4th, president and chief executive officer of Nations Gartmore Investment Management.
Having agreed to divest its U.S. banking operations last year, Natwest will no longer be a competitor of NationsBank. In fact, Natwest stands to benefit from Nations Gartmore as a distribution platform for the U.S. market. Observers said that it's unlikely the British bank would disturb that arrangement.
Bringing distribution to the table is NationsBank's leverage here, said Peter L. Bain, a principal at Berkshire Capital, an investment banking firm that focuses on investment management mergers and acquisitions.
Mr. Smith said the deal resolves any marketing identity crisis the joint venture had endured the past four-and-a-half months while Gartmore was on the block. "We now have a partner in our joint venture that is tremendously strengthened," he added.
