NEW YORK - Travelers Inc.'s acquisition of Salomon Inc. would bring together a mishmash of eight money management firms, catapulting the group to one of the largest active money managers.
The combined firm would have $150 billion in total assets, including $50 billion in tax-exempt assets and $80 billion in mutual funds.
In addition to the new investment advisory empire, the acquisition will magnify greatly the resources of Smith Barney Consulting Group, a huge institutional consultant that is part of the Travelers organization.
Frank Campanale, president and chief executive officer of the consulting group, said, "Salomon Brothers' institutional capabilities and systems and platforms have a lot of integration possibilities" with the consulting group.
He especially noted Salomon's operations in 27 countries in aiding the expansion of consulting globally.
"It's hard to tell yet" how the consulting group's operations will be coordinated with Salomon, he said. "It's a big merger; it's going to take awhile to digest."
But he said he already was meeting with Salomon executives the day the merger was announced.
The Smith Barney Consulting Group, based in Wilmington, Del., and Birmingham, Mich., serves as a fiduciary with discretion to select money managers covering $122 billion in client assets. About 40% of the total is from pension funds and other tax-exempt clients.
Salomon owns Salomon Asset Management Inc., New York, which manages $23.2 billion in total assets, of which $5.6 billion is tax exempt.
Salomon also has a stake in Mastholm Asset Management L.L.P., Bellevue, Wash.
Mastholm was formed this year by Theodore J. Tyson, American Century Investments' former international equity chief, and four others. Mastholm expects to subadvise an international equity fund Salomon will launch this fall. Mastholm executives couldn't be reached for comment.
Travelers agreed to issue stock valued at $9 billion to acquire Salomon. Analysts specializing in the area couldn't immediately estimate how much Salomon's asset management business accounts for in the purchase price.
Travelers plans to combine its Smith Barney Holdings Inc. unit with Salomon Inc. to form Salomon Smith Barney Holdings Inc.
Executives at the companies couldn't be reached to comment on how the acquisition will affect the asset management units or whether any of them will be combined as well. Thomas I. Pulling, chairman and chief executive officer, Smith Barney Investment Advisors, said it is premature to assess the implication of Salomon on Smith Barney's asset management.
Smith Barney brings the most to the marriage in terms of assets under management, with some $100 billion. Its five asset management firms are:
Smith Barney Capital Management, New York, the original Smith Barney advisory firm, which manages $18.6 billion in total assets, including $11.7 billion tax exempt. Its assets are mostly in equities, although it also manages fixed income.
Smith Barney Investment Advisors, New York, formed from the predecessor Shearson advisory firm, which manages $13.6 billion in total assets, including $2.9 billion tax exempt. Its assets are divided between equities and fixed income.
Greenwich Street Advisors, New York, a unit of the predecessor firm E.F. Hutton, which manages $62 billion in total assets, including $16.4 billion tax exempt. Its assets are also divided between equities and fixed income.
First Madison Advisors, Madison, Wis., which manages $100 million, all tax exempt and all in equities.
Peachtree Asset Management, Atlanta, which manages $455 million, all tax exempt. Its assets are mostly in fixed income, although it also manages equities.
Hartford, Conn.-based Travelers has two money management firms:
Travelers Insurance Co., which manages $31.1 billion in total assets, including $10.9 billion tax exempt. All of its assets are in stable-value-type products.
Travelers Investment Management Co., which has $1.2 billion in total assets, including $1.1 billion tax exempt. Its assets are all in equities.
Neither Smith Barney nor Salomon is a major player in the defined contribution market.
Global expansion sought
Smith Barney Consulting Group, meanwhile, has been focusing intensely on expanding globally.
Recently, Smith Barney formed a 50-50 joint venture with Nikko Securities Ltd. to operate a consulting company in Japan to serve pension funds and other institutions there.
The joint venture is in anticipation of Japan's 1998 financial deregulation.
This year Smith Barney Consulting Group also opened its first overseas office, in Hong Kong, to serve institutions there and in Taiwan, Singapore and Thailand.
Salomon itself last week formed its own joint venture in the Far East. Its Salomon Brothers Inc. unit and Shanghai Industrial Investment (Holdings) Co. Ltd., Hong Kong, agreed to establish a joint venture asset management company to manage funds invested in China, Taiwan and Hong Kong. Giampaolo G. Guarnieri, director and chief investment officer of Salomon Brothers Asset Management Asia Pacific Ltd., Hong Kong, said he is spearheading development of the venture.
The new entity, Salomon-Shanghai Industrial Asset Management Co. Ltd., will launch a greater China investment fund. Shanghai Industrial Investment is largely owned by the Shanghai government.
Smith Barney restructuring
In terms of mutual funds, Salomon Brothers Asset Management manages $9 billion in mutual funds or commingled funds.
Smith Barney firms manage $80 billion in mutual funds, about half in money market funds and half in stock and fixed-income funds.
Before the Salomon acquisition announcement, Travelers was in the midst of restructuring its Smith Barney money management operations into one group, said Mr. Pulling, who heads Smith Barney Investment Advisors.
Smith Barney Capital, Smith Barney Investment and Greenwich Street will be unified under a single organization, named Smith Barney Asset Management.
Mr. Pulling said one reason motivating the consolidation is to end confusion by clients and prospects over the different Smith Barney firms.
The newly combined Smith Barney Asset Management will have three divisions: institutional management, to be headed by Bruce D. Sargent, chairman of Smith Barney Capital; non-mutual fund individual client business, to be headed by Mr. Pulling; and the mutual fund operations, whose head hasn't been named yet, Mr. Pulling said.
Virgil H. Cumming was named chief executive officer of the combined Smith Barney Asset Management. He was an executive vice president of Teachers Insurance and Annuity Association - College Retirement Equities Fund.
He joins Thomas W. Jones, former vice chairman of TIAA-CREF, who was hired last month as vice chairman of Travelers and who will oversee its entire money management operations.
First Madison and Peachtree weren't involved in the streamlining.