PARIS - Negotiations by French money manager BNP Paribas Asset Management to purchase an equity stake in Grantham, Mayo Van Otterloo & Co. LLC collapsed at the 11th hour after some partners at the Boston-based firm expressed concerns about independence.
Sources familiar with the negotiations, which took place in the summer, said BNP Paribas wanted a deal similar to the one reached in 1999 with New York bond manager Fischer Francis Trees & Watts Inc. BNP Paribas would have bought an equity stake of around 20%, with a chance to increase it the future.
"BNP's got distribution platforms that GMO wanted to tap. They (GMO) wanted to be able to sell U.S. equities to Europeans, and to date they haven't been able to do that on their own," said one BNPAM source, who declined to be named.
Gaining distribution
Tony Ryan, GMO's senior executive, global client services, confirmed the deal was subject to negotiation.
"It was something we were looking at in terms of gaining distribution in Europe," he said, but he declined to elaborate or say how the deal was voted down. Partners at the firm were warned not to respond to calls from Pensions & Investments.
"It made sense for them; it would have enabled them to distribute their products in Europe through our network," the BNPPAM source said.
But concerns over the terms of the deal, especially the option of increasing the size of the holding, led some of GMO's 39 partners to scuttle the deal at the advanced stage.
While Jeremy Grantham may be an oft-quoted figure in America's financial press, his firm is an unknown minnow in Europe, where it has only a toehold in the British institutional market.
The head of the firm's European business, Paul Woolley, declined to provide details, but it is thought the firm manages $1 billion to $4 billion for clients based in Europe, including AXA's fund-of-funds vehicle and several British pension plans.
Foot in the door
Getting a foot in the door in Europe has long been one of the firm's top priorities, and a marriage with BNPPAM would almost certainly have helped. Sources say this was the way the deal was sold to GMO's partners.
A caucus of partners thought the BNP deal would allow the group to expand its European presence, sources said. The partners viewed the dilution of ownership as a necessary part of expanding the firm.
GMO's Mr. Ryan declined to comment.
BNPPAM is one of the largest money managers in France and the Benelux countries - a key market for institutional money managers. The firm has worldwide assets under management of $160 billion, most of which comes from Europe.
Finding an American partner is critical. Senior management has made expansion of the money management unit a key strategic priority, and they think expansion will be possible only by linking up with American money management specialist firms. Fischer Francis is a bond firm, and BNPPAM wants equity capabilities as well.
Looking at candidates
"We're back on the treadmill to talk to other (American) firms. These things take time before you find the right candidates. We have drawn up a list of candidates and we are in negotiations now," said Philippe Lespinard, BNPPAM global chief investment officer.
The company has retained an investment bank to oversee the process, but Mr. Lespinard was tight-lipped on the issue and declined to name the bank.
BNPPAM recently entered into a joint venture with a local money manager in India, while in Australia it threw in the towel and sold the remainder of its business to Wilson HTM Global Investors, Brisbane.
