On heels of UTI deal, T Rowe Price mulls China AMC deal
Citic Securities is under regulator's orders to reduce its 100% stake in Beijing-based China Asset Management (China AMC) to 49% or below by April. The China Securities Regulatory Commission gave China AMC a final warning to that effect on December 31 and will freeze approvals for new fund-raising efforts by the asset manager until it happens.
One obvious potential buyer of the stake is non-committal. Todd Ruppert, president and chief executive of Baltimore-based T Rowe Price Global Investment Services, won't rule out taking part in the China AMC fire sale.
T Rowe Price is China AMC's partner in the Chinese firm's first overseas investment product. (China AMC still has an active advisory agreement with the US shop for its existing qualified domestic institutional investor (QDII) strategy. But it has since shifted its focus onto developing its own overseas investment capability.)
Ruppert deflected questions on the state of relations between the two companies, including market talk that China AMC had wanted access to T Rowe Price's investment intelligence but was barred from its investment committee meeting. The US shop is "just an investment adviser" to the firm, says Ruppert.
This would not be the first time a foreign shop has looked at buying into China AMC – and walked away. The list of abortive suitors includes Schroder Investment Management in 2004 and Standard Life Investments (SLI) in 2005. Schroders took flight due to a disagreement over valuations, while SLI's UK management backed off, as they did not take a favourable view of the China market at the time.
SLI's negotiations with China AMC had reached an advanced stage; it had the opportunity to take a 16.67% stake for $25 million. Shanghai-based Z-Ben Advisors estimates that 1% of China AMC is now worth $27 million.
T Rowe Price does not see itself as an AllianceBernstein or Franklin Templeton, Ruppert says. The firm is serious about its Asian expansion, but does not plan to buy itself into markets everywhere through mergers and acquisitions, he says. The firm has always been, and will continue to be, fiercely protective of its unique culture. It may grow organically, but all new hires will have to start from the bottom, at an intern or analyst level.
That said, the firm is ready to use M&A in strategic markets. On Wednesday, it closed its acquisition of a 26% holding in one of India's oldest fund managers on Wednesday. The US shop is paying Rs6.5 billion ($142.4 million) for the UTI Asset Management stake.
Each of the four original shareholders contributed a 6.5% stake to the sale. The quartet -- State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India -- will each retain 18.5% of UTI.
The deal is structured to be mutually beneficial, says Ruppert, and although T Rowe Price will not become involved in UTI's day-to-day management, it will receive two seats on the Indian firm's board. T Rowe Price will advise UTI on areas from investment strategies to marketing to risk management, and will introduce UTI's India strategies to its list of international investors. In turn, UTI will help the US manager penetrate the Indian market and import T Rowe Price's strategies into its own products.
Both UTI boss Uk Sinha and China AMC's CEO, Fan Yonghong, were named among the top 25 most influential people in asset management in AsianInvestor's May 2009 issue.
T Rowe Price is looking to step up its game in Asia. For example, it is in talks with regulators and investors about participating in the Taiwan market.
The firm sources about 9% of its assets from non-US institutions and already serves a stellar list of Asia's biggest investors. But it wants to ramp up the number of Asian clients in the coming years.
The US shop is most focused on its institutional footprint in the region. It may also develop a wholesale-level distributional relationship in Taiwan, but it is yet to enter the retail market directly. And Ruppert eyes Hong Kong as a key location for hiring more sales, marketing and services professionals.