BOSTON — Reports that Montreal-based Power Corp. of Canada will pay $3.9 billion for Putnam Investments have left market watchers wondering how the struggling money manager was able to command that high a price.
That price tag for Boston-based Putnam, which parent Marsh & McLennan Cos. Inc. put in play last September, sounds "outrageous," especially in light of Power Corp.'s "frugal, cost conscious" reputation, said an investment banker for one of the parties that had been involved in the four-month bid-a-thon, who declined to be identified.
"It's more than anyone else thought it was worth," said a banker for a different party involved in the later rounds of bidding, who likewise declined to be identified.
One money management executive whose firm eyed Putnam at an earlier stage in the hunt said "we were running numbers in the low $3.0s," and even that was based on a "good-case scenario where we could catch the falling knife."
Those lower estimates partly reflect expectations that a sale will prompt some soul searching — and another round of client defections — among institutional investors and retail fund gatekeepers. In a Nov. 23 report, John Reucassel, a Toronto-based analyst with BMO Capital Markets, predicted "roughly 20% attrition in both (Putnam's) mutual fund and institutional assets" should Power Corp. buy the money manager. "Any acquirer of Putnam is going to have to assume some continuation of asset attrition over the next couple of years," Mr. Reucassel wrote in the report.