After a brief hiatus, consolidation is once again ripping through the mutual fund business. And this time, banks are expected to participate.

On Monday, a spokesman for American Century Investments confirmed reports that J.P. Morgan & Co. is seeking to buy a noncontrolling stake in the Kansas City, Mo., fund company. The blue-chip bank is believed to be offering $900 million for 45% of American Century, which manages $58 billion. Morgan declined to comment.

Coming on the heels of the planned $2 billion-plus acquisition of Scudder, Stevens & Clark by Zurich Group, the talks signaled a growing willingness among buyers to pay up for big-name mutual fund companies. Deals for fund companies had slowed recently because of concern that prices were too high, but the raging bull market has kept them aloft.

The fact that a commercial bank is involved in the latest high-profile deal is likely to send other banking companies that are serious about the business to the bargaining table, investment bankers said.

"They don't need just assets, they need talent," said Roberto deGuardiola Jr., president of Liquid Distribution Systems Inc., a New York investment banking boutique.

Fund companies that could be snapped up by a bank include Founders Asset Management, a Denver firm with $4.8 billion of assets, and Columbia Funds Management, Portland, Ore., with $5.7 billion of assets, sources said.

Crabbe Huson Group, also of Portland, is looking for a partner, possibly a bank, to help it expand retail distribution, president James Crabbe said in a telephone interview Monday. The company manages $1.1 billion of mutual fund assets.

Among the banks most likely to acquire a fund company are those that already have strong retail fund franchises. These include First Union Corp., Chase Manhattan Corp., BankAmerica Corp., KeyCorp, and PNC Bank Corp. Indeed, Chase took a serious look at Scudder, investment bankers said.

While investment bankers say price is no longer keeping banks from acquiring fund companies, they add that cultural barriers can be difficult to surmount.

Many fund companies are unwilling to turn over the reins to a bank that might not understand how to run an investment business, retaining highly paid money managers and other fund executives.

"It's a generalized concern that if compensation issues are not addressed right up-front, it could be a deal-killer," said William Houlihan, an investment banker at Keefe, Bruyette & Woods Inc., New York. "But it's not an automatic, because I think those issues can be satisfied."

"J.P. Morgan has the best shot because it is viewed as one of the more prestigious commercial banks," added an investment banker who requested anonymity.

Even First Union, which has generally received high marks for its integration of the three fund companies it has bought since 1994, is still working out some culture and compensation issues. It recently lost Warren Isabelle, a successful fund manager, to a small firm willing to give him an equity stake in the company.

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