The price to be paid by Montreal-based holding company Power Corp. of Canada is at the higher end of most estimates and could be good news for Marsh's battered shareholders. While the companies have reached agreement, the deal still needs the approval of Putnam employees who own shares in the company, Putnam mutual-fund shareholders and the board that oversees the funds.
The Situation: Holding company Power Corp. of Canada agrees to buy Putnam Investments for $3.9 billion from Marsh & McLennan, pending approval from various parties on the Putnam side.
The Background: Marsh's sale of Putnam is part of an effort to move past a difficult period marked by investigations and tough market conditions.
Bottom Line: Marsh got a price near the high end of most estimates. Power makes a foray into U.S. mutual funds via a firm on the mend.If the fund board and employees approve, a deal is expected to be announced early next year pending fund-shareholder approval, people familiar with the matter said.
Power Corp. doesn't plan drastic changes to Putnam's management or structure, according to these people. That makes the remaining necessary approvals more likely though not guaranteed, and a marked deterioration in Putnam's business also could delay or shelve a deal, these people said.
Power Corp.'s emergence as the front-runner in the bidding, ahead of rivals Amvescap PLC of the United Kingdom and UniCredito Italiano SpA of Italy, was reported this month.
A Marsh & McLennan spokesman declined to comment. Power Corp.'s offices are closed this week and its phone system didn't allow callers to leave a message or access a company directory.
Shares of Marsh, which in addition to Putnam has insurance-brokerage and business-consulting units, stood at $30.72, down 25 cents, or 0.8%, in 4 p.m. composite trading on the New York Stock Exchange. Shares of Power Corp. were at 35.08 Canadian dollars (US$30.43), up eight Canadian cents, or 0.2%, on the Toronto Stock Exchange.
For Power Corp., Canada's biggest mutual-fund operator via its majority ownership of IGM Financial Inc., the purchase provides a significant footprint in the U.S. money-management business. Expansion has been a priority for Power Corp.'s chairman, Paul Desmarais, one of the wealthiest men in Canada.
IGM has run mutual funds for more than 75 years. For most of that time, it was known as Investors Group. It teamed with Mackenzie Financial, another large Canadian mutual-funds distributor, in April 2001, and three years later the combined entity added a smaller family of funds.
In a Putnam pact, Power Corp. would be acquiring a firm on the mend. Putnam's funds were hit hard by the bear market of 2000-02, and the firm was then ensnared in the fund-share-trading scandal kicked off by New York Attorney General Eliot Spitzer in 2003.
Putnam's $191 billion total under management is slightly less than half its peak total in 2000. Assets have ticked up lately, however, thanks to rising stock prices and improving relative returns for some Putnam stock funds. Power Corp. is expected to keep Putnam President and CEO Charles "Ed" Haldeman Jr., who took over amid the share-trading scandal, at the helm.
The sale is part of President and Chief Executive Officer Michael Cherkasky's effort to retool the company following its costly tangle with Mr. Spitzer, now governor-elect of New York.
Mr. Cherkasky, who had run the company's investigative unit Kroll, took Marsh's reins in October 2004, when an industrywide bid-rigging inquiry led by Mr. Spitzer had the company's Marsh Inc. insurance brokerage in crisis