SYDNEY, Australia -- Deutsche Bank Group's proposed sale of BT Funds Management Australia, Sydney, has failed to secure a willing buyer, in what might turn out to be one of the most embarrassing deals in recent funds management history.
On June 3, a day ahead of the deadline for clinching any sale, the last potential buyer for BTFM -- Westpac Banking Corp., Sydney -- told Deutsche it did not think the conditions of the proposed purchase could meet the necessary "clear commercial criterion."
Consequently, said David Morgan, Westpac managing director, it was not in the interests of Westpac shareholders to proceed.
Talks over
Bankers Trust Managing Director Rob Ferguson said Deutsche Bank had confirmed that the sales discussions had ended and Bankers Trust Australia (comprising the funds management business and the separate investment banking business) would be wholly owned by Deutsche.
The acquisition of Bankers Trust Corp. by Deutsche was finalized June 4.
Other potential bidders for BTFM that dropped out of the race in the final weeks of negotiations included National Australia Bank, Melbourne; Commonwealth Banking Corp., Sydney; Lend Lease Corp., Sydney; and the Principal Financial Group, Des Moines, Iowa.
BTFM has A$37.6 billion (U.S.$24.4 billion) in funds under management -- 7.6% of the total Australian market -- of which about A$17 billion is in the more profitable retail funds sector. This ranks it second, overall, behind AMP Ltd., Sydney, which has A$55.7 billion or about 11.25% of the market.
BT was seeking up to A$2.5 billion and Westpac is reported to have offered about A$2 billion.
A price of A$2 billion would have been "right at the very top of the range and the highest price ever paid for funds under management," said Nick Birrell, managing director of NAB subsidiary County Investment Management, Melbourne, a competing funds manager.
Aggressive strategy
Any acquisition would have required an aggressive growth strategy to justify the price. "Not only would it have been a case of bedding down, but getting it to grow rapidly to justify the price paid," he said.
Bankers closely involved with the deal said the breakdown was over Westpac's need to integrate BT fully into its funds management business, which ran up against the BT Australia staff's desire to continue the autonomy they had enjoyed as part of the BT group.
Deutsche, which acquired the BT Australia group as part of its purchase of Bankers Trust, New York, originally said it would run BTFM as a separate funds management operation to its existing Morgan Grenfell funds management arm.
But after eight months of ownership uncertainty and a 10-week sale process, the collapse of the sale coincides with Australian BT staff being released from their BT New York "golden handcuffs" non-compete agreements. Arun Abbey, the executive chairman of investment consulting firm IPAC Securities, Sydney, said the changed circumstances could mean "the hurdle for poaching their staff has dropped enormously."
Other major funds managers have been benefiting from the uncertainty because several consultants have had BT Australia investment products in "hold" since the start of the process.
In the last available industry figures, BTFM's inflow of retail investment money dropped to less than half that of Commonwealth Bank and Westpac, leaving BT in eighth place for the first quarter and fifth place for year ended March 31.
