One year after the trading scandal that cost Paris-based Societe Generale SA €4.9 billion ($6.4 billion) and ushered in a dramatic overhaul of the global financial industry, the bank's fund management division is itself being dismantled.
Societe Generale Asset Management's European and Asian operations as well as 20% of Los Angeles-based TCW Group Inc. will merge with Paris-based Credit Agricole Asset Management, according to a preliminary agreement announced in January. SGAM will contribute e€78 billion to the joint venture, more than half its total assets under management as of Sept. 30, according to a company announcement.
The deal will create a money management company with €638 billion — the fourth largest in Europe. SocGen, France's second largest bank by market capitalization, will own 30% of the new company, while the majority will belong to Credit Agricole, the nation's third-largest bank by market capitalization.
“Basically, because the asset management industry as a whole has changed a lot over the last year or so, (SocGen officials) felt that SGAM also needed to change in order to move forward under this new financial environment,” spokesman Jolyon Barthorpe said.
Both SocGen and Credit Agricole are targeting pre-tax cost savings of €120 million on an annual basis after three years, or about 12% of the combined cost base. An initial public offering of the newly combined manager could occur after a lockup period of five years, according to the terms of the agreement.