Liberty Financial Cos.' pact to buy Societe Generale's U.S. asset management arm has fallen apart because of asset shrinkage at the French company's unit.

The $216 million deal, which was announced in August, allowed Liberty to back out if Societe Generale Asset Management Corp.'s assets fell 30%. By early this year, assets in the handful of mutual funds that the French bank's New York-based unit manages had fallen 40%, to $3 billion.

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