$1.9 billion manager becomes fourth former affiliateof UAM to buy itself back from parent Old Mutual
PHILADELPHIA - Money manager Cooke & Bieler became the latest Old Mutual/United Asset Management affiliate to break away from the parent, finalizing a deal last week to buy itself back from Old Mutual PLC.
Terms were not disclosed. Samuel Ballam, principal at Cooke & Bieler, said it was a cash transaction that closed June 8.
Mr. Ballam said the deal was not spurred by Old Mutual's purchase last year of UAM. He said officials at the firm, which joined UAM in 1986, already were in talks with UAM executives about changing the equity structure before the Old Mutual deal was announced.
Frank Kettle, executive vice president at UAM, said they created "a fair deal that works in the best interests of the shareholders of Old Mutual and the clients and employees of Cooke & Bieler."
Mr. Ballam said the decision to buy back the firm was based on the desire of the second generation to become independent and have the financial benefit of ownership.
Also, Mr. Ballam said, it became clear that Old Mutual executives were focusing their attention on a core group of firms. Cooke & Bieler was not part of that group, nor did its staff want to be a part, he said. "We're optimistic about our future," he added, "and there's an economic incentive for us to be successful together."
Following others' lead
Cooke & Bieler is the fourth former UAM affiliate to go the buyback route, following Sterling Capital Management Co., Chicago Asset Management, Hellman, Jordan Management Co. and Investment Research Co. Two other firms, Murray Johnstone International Ltd. and Pell Rudman Trust Co., were sold to Aberdeen Asset Management and AMVESCAP PLC, respectively.
Eight principals, including Mr. Ballam and portfolio manager Kermit Eck, repurchased the Cooke & Bieler. Its name, location and personnel will remain intact. Its focus on active domestic large-cap and midcap value equity will stay the same.
There is no president or chief executive officer of the firm, said Mr. Ballam. He said the ownership is a partnership, and that is how decisions will be made. "We wanted there to be a fair amount of equality," he said.
The firm has $1.9 billion in assets, a number that has dropped steadily since 1996, when Cooke & Bieler had $5.6 billion in assets. (U.S. institutional tax-exempt assets dropped to $1.3 billion from $4.6 billion at the end of 1996). "It was rough for us in the 1990s being a value manager in a growth environment," said Mr. Ballam.
However, performance of the firm's two largest separate accounts roared back in 2000. The large-cap value separate account returned 20.3% last year, ranking in the second decile of the Pensions & Investment Performance Evaluation Report universe. Its balanced separate account returned 16.1%, placing in the top decile. This year, for the first quarter, the two portfolios are in the 3rd and 2nd deciles, respectively, according to PIPER.
The strong performance has resulted in increased interest from pension executives and consultants, said Mr. Ballam, noting the firm is involved in six searches. "There is a light at the end of the tunnel for value managers," he said. "It just seems like the investment world is rediscovering firms like Cooke & Bieler."
Bruce Graham, president of consulting firm Shields Associates, New York, said Cooke & Bieler's timing is right in executing the buyback. "Their returns have really picked up and the market is moving in their favor," Mr. Graham said.
Cooke & Bieler shouldn't have a problem going it alone as a small independent firm, he said, because it has stuck to its discipline and carved out a niche as an institutional value manager.
Mr. Ballam said company executives are not concerned about making their mark as an independent after 15 years as a UAM affiliate. "We think the ocean is plenty big enough for firms like ours that do what they do well."