* F&C shareholders to get 120p in cash plus 2p dividend
* 12.1 pct shareholder Aviva to vote in favour of deal
* 2nd biggest shareholder says keeps options open
* F&C shares move to slight premium to value of bid
* Shares up 5 percent, rise as high as 123p
(Adds shareholder reaction, updates shares)
By Chris Vellacott
LONDON, Jan 28 Bank of Montreal has
reached a deal to buy UK-based F&C Asset Management Plc
for 708 million pounds ($1.2 billion) just a day after first
announcing an offer, saying the move would help expand its
wealth management arm.
The agreement announced on Tuesday marks a major push by
Canada's fourth-largest bank to expand its funds division and is
in line with moves by some other banks to grow in the relatively
less risky fund management sector.
The deal sent shares in F&C, operator of the world's oldest
investment trust, up another 5 percent on top of double-digit
gains the previous day after the bank first said it had made a
The stock rose as high as 123 pence, a slim premium to the
value of the bid and suggesting some investors believe a better
offer could still be in prospect.
The two companies said F&C shareholders will be entitled to
120 pence in cash for each of their shares, plus a dividend of
2p per share for 2013. F&C's largest investor, insurer Aviva Plc
which holds 12.1 percent, pledged to vote in favour of
However, F&C's second-largest shareholder Standard Life
Investments gave a cool response, saying the valuation
represented a good price from the buyer's standpoint.
"We intend to keep our options open should another suitor
for F&C emerge," said David Cumming, global head of equities at
Standard Life Investments, which holds 10.2 percent of F&C.
The terms of the offer value F&C at around 0.9 percent of
its assets of some 82 billion pounds, which could be relatively
cheap given research from consultancy Scorpio Partnership last
year found an average price paid for wealth management
acquisitions as a proportion of assets of 1.22 percent in 2013,
down from 1.98 percent in 2012 and 4.81 percent in 2009.
Yet some analysts said they viewed a rival bid as unlikely.
"We would still argue that a counter-bid is not completely
impossible, although probably a fairly remote probability,"
brokerage Numis said in a note to clients.
The acquisition by Bank of Montreal, which already has some
C$184 billion in assets under management, follows a similar path
trodden by rival Royal Bank of Canada, which also
targeted the UK for an expansion of its wealth arm and bought
Bluebay Asset Management in 2010.
Following the 2008 financial crisis, many bankers view
wealth management as an effective buffer against more volatile
capital markets businesses, because of the tendency for clients
to stay relatively loyal to their favourite funds or fund
managers, and the low capital requirements of asset management
F&C directors holding shares representing 0.2 percent of the
company have committed to the deal and will recommend other
shareholders approve the deal.
"The products, geographic presence and cultures of both
organisations are truly complementary," said Richard Wilson,
chief executive of F&C. "This is clearly a very positive outcome
for both our clients and employees."
The London-based fund manager, which traces its roots back
to the launch of the Foreign & Colonial Investment Trust
in 1868, also released a trading statement saying it
had 82.1 billion pounds of assets under management at the end of
2013, down from 90.1 billion three months earlier.
Analysts said the performance was in line with their
Bank of Montreal was advised by Barclays on the deal, while
F&C was advised by JP Morgan Cazenove.
($1 = 0.6034 British pounds)
(Additional reporting by Huw Jones; Editing by Tommy Wilkes and