During the Chinese lunar new year, two French giants, Societe Generale and Credit Agricole, announced the merger of their asset management businesses worldwide.

The deal combines the entirety of Credit Agricole Asset Management with the European and Asian businesses of SG Asset Management as well as 20% of TCW, a US-based fund manager. Together, the new entity, which has yet to be named, will be responsible for €638 billion ($836 billion) of assets under management, as of 30 September 2008, making it the ninth largest asset management company in the world.

As of September, CAAM manages €460 billion and SGAM €178 billion.

The fingerprints of the French government are evident in the corporate announcement which notes the size of this group is "reinforcing the importance of Paris as a major European financial centre".

Credit Agricole will own 70% of the new entity and SG 30%. Credit Agricole will appoint the chairman and two-thirds of the directors of the board. Yves Perrier, currently CEO at CAAM, will become CEO of the new entity. Both partners have a five-year lock-up but will consider a stock listing after that point.

Its aim is to not only dominate manufacturing for European retail channels but to be a full-service asset manager for the global institutional community. The scale of the combined groups is meant to bolster the new company's competitiveness and allow it to lower prices in client service and production costs. "The new entity will target a cost/income ratio below 50%", says the joint company announcement.

CAAM has fund joint ventures in China and Korea, with Agricultural Bank of China and the National Agricultural Cooperative Federation (Nonghyup), respectively, and is in the process of looking to create a similar structure in India. The region is run by Thierry Mequillet.

SGAM, meanwhile, has an older, more established China JV with Baosteel called Fortune SGAM Asset Management, whose CEO Denis Lefranc was promoted to run SGAM Asia-Pacific last year. SG also has a successful JV in Korea with the Industrial Bank of Korea and a large business in Japan from a partnership with Yamaichi Securities. As of the end of 2007, SGAM had over 800 employees in the region.

In other words, there is plenty of overlap throughout the region, and it's not clear that the dominance of CAAM in the new entity is mirrored in their respective positions in Asia-Pacific.

This deal seems to emphasise synergies in Europe, which belies rhetoric from both companies about how their future growth prospects are in Asia. At this point, the extent to which the Asian CEOs were involved in this deal is unknown and businesses in the region have been closed for the holiday. It is likely that Mequillet, Lefranc and their many employees – and clients – will return from lunar new year breaks to sort out a very messy jigsaw.