Merrill Lynch & Co. has agreed to acquire Mercury Asset Management Group PLC, an international investment group based in London, for $5.3 billion in cash.
A plan for Merrill to buy Mercury, which manages $177 billion in assets, was approved by the companies' boards of directors Wednesday.
The deal would create one of the largest asset management groups in the world.
Mercury has nearly 200 fund managers and approximately 1,300 employees in 19 offices worldwide.
The British money manager has a strong reputation at home, said Michael Schroeder, an analyst with Wasmer, Schroeder & Co., in Naples, Fla. "It's a premium name. They're kind of the Fidelity equivalent in the U.K."
Based on Mercury's closing share price on Tuesday, Merrill is shelling out a premium of approximately 32% for the firm.
"They are paying a premium but a rational premium given the scarcity" of asset managers, said Donald Putnam, chief executive of Putnam Lovell & Thornton, a San Francisco-based investment bank to the money management industry.
"Merrill was legitimately desperate to acquire an asset management firm," he added.
The arrangement will make Merrill the world's third-largest money manager, with $450 billion in assets under management, behind Fidelity, with $600 billion, and Barclay's PLC, with $475 billion, he added.
"Conceptually it seems like a good move," Mr. Schroeder said of the deal. "We think there is a global trend toward fee-based asset management and asset gathering."
Mercury manages money for more than half the companies which are members of the FTSE-100 Index and for 25 of the largest 50 Japanese corporate pension funds. Its clients include 5 of the 10 largest pension funds in the world. The combined business will be based in London.
- Stephen Garmhausen and Niamh Ring
