Old Mutual wealth to buy UK firm for £585m

London - Financial services group Old Mutual's wealth arm said on Friday it would buy money manager Quilter Cheviot from European private equity house Bridgepoint, strengthening its focus on richer customers.

The £585m purchase brings Old Mutual Wealth's assets under management to £92bn, a rise of more than 20%.

The purchase will increase Old Mutual's exposure to the lucrative wealth management market, which is forecast to grow by between 6% and 8% a year. Britain's affluent population represents around 55%, or £1.7trn, of the country's wealth market, the company said.

The deal would enable Old Mutual to offer investment management services to clients with more than £1m to invest, Old Mutual CEO Julian Roberts told Reuters, adding to existing "affluent" customers, who have at least £50 000.

"What Quilter does is to take us into the high net worth (clients)", Roberts said. "We are not at the mass market level."

Old Mutual paid for the company with the proceeds of the sale of some European businesses and the US initial public offering of OM Asset Management, which closed this week.

The deal price for Quilter Cheviot includes £42m of deferred equity, contingent on the performance of the business, the company said.

Old Mutual said it aimed to achieve annual cost savings of £15m by 2017.

Bridgepoint achieved an internal rate of return of 55% from the sale of Quilter Cheviot, a source familiar with the deal said.

Analysts said the deal price, representing 3.6% of Quilter Cheviot's assets under management, compared well with similar transactions such as US-owned Franklin Templeton Global Investors' purchase of British firm Rensburg Fund Management in 2011, which came in at more than 5% of AUM.

"This is a smart, well-priced deal for Old Mutual," said Eamonn Flanagan, analyst at Shore Capital, in a client note, reiterating his hold recommendation on the stock.

Flanagan added Old Mutual "is starting to look very attractive once the current volatility in investment and forex markets settles down".

The company's shares rose 1.2% to 171.6 pence by 12:40.

Old Mutual said the deal likely represented an end to its acquisition activity in Britain.

But Roberts reiterated that the firm has expansion plans in sub-Saharan Africa, where it has so far spent R 700m ($63m) of a R5bn investment programme.

"We want to build our business in Nigeria, Kenya and Ghana, we want to be a major player in those markets, both through organic and inorganic growth," he said.