J.P. Morgan & Co. plans to shed two of its overseas asset management units-one in Australia, the other in France.
The banking company announced Tuesday that it has agreed to sell J.P. Morgan Investment Management Australia to Salomon Smith Barney. Morgan said it concluded that the unit, which manages more than $4.8 billion in institutional assets, was no longer a strong strategic fit because of changes under way in the Australian pension market.
The deal came one day after Morgan announced that it would sell its French institutional investment management unit to Credit Commercial de France of Paris. The unit has $2.5 billion under management.
Terms of the transactions were not disclosed, but Financial Review, an Australian business newspaper, reported last week that Salomon would pay about $73 million for its purchase. Thomas Courtney Jr., an investment banker who concentrates on mergers and acquisitions in the asset management business, estimated that Credit Commercial would pay about $40 million.
The proposed sales are only a small slice of Morgan's asset management business, which had $288 billion under management as of March 31. But they signal a strategic move to pluck less profitable units in order to boost overall performance.
"I think they're doing some pruning, like a gardener keeps his garden in shape," said Mr. Courtney, of Courtney Group Inc., New York.
After a cost analysis, Morgan-which is primarily an institutional investor-decided that it would have to plow substantial resources into the overseas units to make them profitable. A spokeswoman said that the company will continue to expand operations in the United States, Europe, and Asia.
Last year Morgan's earnings fell 7%, to $1.465 billion, but its asset management revenues increased 15%, to $1.035 billion.
Mr. Courtney and other analysts said that the proposed deals were primarily driven by recent trends in the countries' markets.
In May Australia passed legislation that lets private citizens invest their own retirement funds, giving an edge to retail-oriented investment firms.
"Morgan doesn't focus on retail markets, so it doesn't surprise me that if they did enough research to determine the market was shifting toward retail that they would divest themselves of those operations," said Stephen Biggar, an analyst with Standard & Poor's in New York.
"It's obvious that in that type of environment, this business would fit better with a parent organization that is totally focused on retail investors," said Mr. Courtney. That's where Salomon Smith Barney comes in, he said.
The management team in the Australian unit would move to Salomon Smith Barney Asset Management. The deal is expected to close within one month.
In France, domestic banks have a stronghold on the market, leaving outsiders scant opportunity for growth. Mr. Courtney suggested that Morgan would use the money from the sale to move into a broader European market.
The spokeswoman for Morgan said its remaining investment interests in France will focus on expanding business with private clients, mutual funds, and an alliance with Banques Populaires, a major French bank that distributes some of Morgan's investment products.
All 25 employees of the institutional management business have been offered positions with Credit Commercial. The transaction is expected to close in mid-July.
Morgan declined to disclose the asset mix of the investment firms, but the spokeswoman indicated that the banking company's current split is 33% equity, 37% fixed income, and 23% balanced investments, with the remainder divided among real estate, emerging markets, and special investments.
