SGAM Asia JVs excluded from CAAM deal

The real work of figuring out the structure of the Credit Agricole/SG asset management merger wonÆt begin until September.

Although first announced in January, the merger of Credit Agricole and Societe Generale's asset management businesses has not yet begun in practice.

The two firms have now signed a formal agreement in Paris to carry out the deal, which will create a new entity with €591 billion ($830 billion) of assets, which it says will make it the world's eighth largest asset manager.

The deal still has to be cleared by a number of regulatory agencies around the world, notably those in China, where the securities regulator maintains an unwritten rule that a foreign company cannot own more than one minority stake in a local fund house. Both SG Asset Management and Credit Agricole Asset Management have Chinese joint ventures.

Nonetheless Denis Lefranc, SGAM's CEO for Asia-Pacific in Hong Kong, says the deal is expected to close by the end of the year, assuming all regulatory approvals are met. He would not comment on the China situation, other than to acknowledge it is the only market with this issue.

Work on figuring out how to merge the entities, deciding what units to combine, maintain or discard, and choosing the executives to lead them, was not allowed to begin under French law until the deal was signed. Now this has taken place, although the European summer holiday is close at hand, and nothing of substance in Paris is going to be achieved during August. The hard bargaining will take place in September and October.

In the meantime SGAM and CAAM officials are said to be quietly lobbying the China Securities Regulatory Commission to work out a solution to Beijing's stance on foreign participation in local JVs. (BNP Paribas Investment Partners faces a similar problem.)

This is being pitched as a quest to protect the interests of the two JVs' Chinese partners.

Notably the final agreement between SG and Credit Agricole says that SGAM's China and Korea JVs (with Baosteel Group and Industrial Bank of Korea, respectively) will not be included in the newly combined asset management company.

It does include 100% of CAAM's activities, along with 20% of TCW (a unit of SG) and SG's India joint venture (with State Bank of India).