Lincoln sells Delaware Management to Macquarie, Columbia to Ameriprise next?

Consolidation in the asset management industry is picking up, with one major deal done today and another one on tap, according to sources

Aug 19, 2009 @ 3:01 pm

By David Hoffman and Mark Bruno

One big deal is in the books — and another is in the process of being finalized — a sign that merger and acquisition activity continues accelerate in the money management industry.

Lincoln National Corp. of Radnor, Pa., today revealed that it is selling its asset management unit, Delaware Management Holdings Inc., for $428 million to Macquarie Group Ltd., a Sydney, Australia-based financial services firm.

The deal for Philadelphia-based Delaware Management, which had more than $125 billion in assets under management at the end of June, is expected to close at the end of the year.

Meanwhile, sources noted that Ameriprise Financial Inc. of Minneapolis is inching closer to acquiring the equity and fixed-income businesses of Columbia Management Group LLC of Boston, which have roughly $200 billion in combined assets, as two other potential buyers have now bowed out of the bidding.

Bank of America Corp. of Charlotte, N.C., which owns Columbia, has been shopping the units for months. Ameriprise, along with Nuveen Investments LLC of Chicago and OppenheimerFunds Inc. of Boston, have reportedly been the three most interested parties in acquiring the Columbia businesses.

But now Nuveen, which is owned by the Chicago-based private-equity firm Madison Dearborn Partners LLC, and OppenheimerFunds, have withdrawn their offers for the units, said one source close to the sale who could not speak for attribution.

Representatives at Bank of America, OppenheimerFunds and Nuveen all declined to comment.

Ameriprise had not yet returned calls for comment.

Ameriprise appears to be set to pay $1 billion to $1.25 billion in cash for the Columbia businesses, the source added. A formal announcement is expected to come before Labor Day, another source familiar with the deal noted.

News of the deals follows the blockbuster deal in June in which BlackRock Inc. of New York agreed to buy of San Francisco-based Barclays Global Investors, including its iShares exchange traded fund business, for $13.5 billion from Barclays PLC of London.

Other deals are expected, according to market watchers.

The combination of lower profits and a recent stock market rally is likely to fuel mergers and acquisitions activity among asset managers in the months ahead, according to an report released Aug. 10 by Keefe Bruyette & Woods Inc. of New York.

A number of publicly traded asset managers, such as Franklin Resources Inc., Legg Mason Inc., Affiliated Managers Group Inc. and The Blackstone Group, have expressed an interest in acquisitions, the report said.

The deal involving Delaware Management was widely expected.

In its statement, Lincoln said the proceeds of the sale will be used for “general corporate purposes,” including potentially paying back some of the $950 million in bailout funds it received in June as part of the government's $700 billion Troubled Asset Relief Program.

It is also assumed that a deal for Columbia would also be used to help it pay back some of the $45 billion in government bailout funds it received.

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