Though First Union Corp. is buying Wheat First Butcher Singer primarily for its equity underwriting business, the Richmond, Va.-based firm's money management arm was an appealing bonus.
First Union said it will operate Wheat First's Mentor Investment Group as a stand-alone business.
That's a surprising strategy for the acquisitive Charlotte, N.C.-based bank. First Union's Evergreen Keystone Funds were created from several mutual fund purchases.
Everen Securities Inc. will continue to own 20% of Mentor Investment, which manages $11.5 billion of assets, said Daniel J. Ludeman, Mentor's president and chief executive officer.
First Union executives "realized we serve a unique market, in terms of Wheat and Everen, that they currently do not serve," Mr. Ludeman said.
The acquisition is expected to close in the fourth quarter.
Everen, based in Chicago, is a national broker-dealer that was spun off from Zurich Kemper Investments Inc. in 1995. Everen, which bought into Mentor last year, has the right to increase its stake to 30%.
Mentor's executives have an aggressive growth target to rival the ambitious one First Union's CEO, Edward Crutchfield, has set: amassing $100 billion in fund assets by 2000.
Mentor wants to double total assets managed-retail funds and money managed for institutional clients-in two years, Mr. Ludeman said.
The company plans to accomplish this via sales through Wheat First and Everen brokers to retail and high-net-worth clients, he said.
Wheat First's retail funds, which manage $10 billion of assets, are conservatively run with high expenses, said Mike Stout, an analyst at rating agency Morningstar, Chicago.
The funds are well managed, he said, but the high fees and conservative investment strategy have kept the funds from earning Morningstar's highest ratings.
Mentor manages about $7 billion in money market funds. That should help round out First Union's fund offerings, Mr. Ludeman said, complimenting the bank's previous acquisitions that helped it gain size and expertise in stock and bond funds.
Of Mentor's seven investment strategies, its non-money-market funds are the fastest growing, Mr. Ludeman said. u
