M&A: A Latin theme

Juan AlcarezPioneer Investments has American and Italian ancestry – and now it has Spanish blood too. Nick Fitzpatrick examines the deal to merge the asset management business with Santander’s. The Eurozone’s largest bank, Spain’s Santander, announced in April that it would merge Santander Asset Management, which it partly owns, with Pioneer Investments. The merger with Pioneer Investments, which is owned by Italy’s UniCredit bank, will create one of the largest asset managers with operations in Latin America and place it in the top 35 asset management businesses globally, with €400 billion ($456 billion) of assets under management. Pioneer and Santander in numbersBoth businesses have significant operations in the region and the deal means that the combined manager, called Pioneer Investments, will have around €350 billion in assets under management in Europe and Latin America, according to Santander. Pioneer stands to gain increased distribution capability from Santander’s banking network. In recent years, it has been looking to increase its assets from outside of UniCredit’s distribution channels. UniCredit’s 2014 annual report stated that assets under management at Pioneer Investments were expected to grow from €174 billion to approximately €263 billion, mainly driven by growth in non-captive flows.   When the deal was announced in April, Pioneer had grown to manage €225 billion in assets, evenly split between proprietary distribution via UniCredit on one side, and intermediary and institutional clients globally on the other. Back in 2012, Pioneer’s relationship with UniCredit was reviewed and a distribution agreement set specific requirements in terms of performance and quality of service provided by Pioneer. In a reciprocal gesture, UniCredit committed to support Pioneer in its distribution network, maintaining an agreed level of market share. Against this background, the deal is good for Pioneer as Santander Group is a large player in Latin America, with operations covering private banking and other activities. At the group level, Latin America contributed 38% to Santander’s profits in 2014. Continental Europe’s contribution was 33%. In the first three months of 2015, the rate of growth in Santander’s mutual fund business in Brazil was 17% – faster than that of deposits, which grew by 7%.  Pioneer and Santander dealA similar pattern is seen in the bank’s home market, Spain, where funds grew 28% and time deposits dropped 16%. Santander is also a joint owner of Allfunds Bank – a Europe-based distribution platform owned partly by Italian bank Intesa Sanpaolo. AllFunds has a presence in Chile, though with an open-architecture model, it provides no guarantee of flows to the merged business. According to its own figures, Pioneer had more than €13 billion global net sales in 2014 and ranked among the top five highest-selling asset managers in Europe. It was 10th worldwide. Juan Alcaraz (pictured), current chief executive of Santander Asset Management, will be the global chief executive of the merged business. Giordano Lombardo, current chief executive and group chief investment officer of Pioneer Investments, will be the global chief investment officer. In November last year, Sandro Pierri quit as Pioneer’s chief executive while the merger talks were going on. He had been in the role since 2012.  Lombardo was Pioneer’s deputy chief executive and chief investment officer at the time. Pioneer Investments arguably has most recognition in absolute-return fixed income and multi-asset investing. It also offers equities.  At a client conference this year, Lombardo said that ‘liquid alternatives’ are also a growth development area for the business. (Funds Global – Latin America reports on the conference on pages 18-19). “Liquid alternatives is still an unproven proposition but I’m convinced that it has legs,” Lombardo told Funds Europe. Pioneer was among the first foreign asset managers to win a mandate from a Mexican pension fund, as funds in Mexico seek to internationalise their assets. Santander Asset Management’s offerings include specialised mandates in European and Latin American fixed and variable income. The merger deal valued Pioneer at €2.75 billion and Santander Asset Management at a little less, €2.60 billion, including the 49.5% stake in AllFunds Bank. Pioneer’s assets under management are also bigger (see box opposite). Santander Asset Management is partly owned by two private equity firms.
©2015 funds global latam

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