Crédit Agricole and Société Générale have signed a preliminary agreement to combine their asset management operations, comprising the whole of Cr&eacu
Crédit Agricole and Société Générale have signed a preliminary agreement to combine their asset management operations, comprising the whole of Crédit Agricole Asset Management, and the European and Asian activities of Société Générale Asset Management, as well as 20 per cent of TCW, SGAM’s asset management subsidiary in the US.
Société Générale Asset Management’s alternative investments will become part of its Lyxor special asset management business, which will remain within the SG group.
The combined entity will be the fourth largest asset manager in Europe and the ninth on a global basis as measured by asset under managements, which stood at a total of EUR638bn for the merging businesses at the end of September. Ownership of the combined business will be split between Crédit Agricole (70 per cent) and Société Générale (30 per cent).
According to the two institutions, the deal will create the leading provider of asset management for the retail banking networks of the Crédit Agricole and Société Générale groups, with around 50 million retail customers worldwide, plus a full-service institutional asset manager backed by an international network.
They say the merger combines manufacturing of retail products while remaining focused on providing specific solutions to the distribution networks of each partner. Over time, this manufacturing capability could be offered to other European operators.
For institutional clients, the combined entity will be able to take use a product offering across a broad array of asset classes (notably in fixed income, equities, and guaranteed products) and currencies (€, USD, Yen).
The companies also say the combined entity will have the ability to be extremely competitive in terms of production costs and quality of client servicing. The new entity will target a cost/income ratio below 50 per cent.
It will have a presence in 37 countries, and core manufacturing centres in France, the UK, North America, Japan, Hong Kong and Singapore. In addition, it will serve the international networks of the Crédit Agricole and Société Générale groups, including, amongst others, Central and Eastern Europe, Russia, Italy and Greece.
It will also have international partnerships with local banks in other regions, notably in Asia, including in China, India, Korea and Japan, where there is expected to be significant growth potential.
The transaction should result in full-year pre-tax cost synergies of approximately EUR120m, within three years.
Société Générale will appoint one third of the directors to the new entity’s board. The chairman will be appointed by Crédit Agricole and the vice-chairman by Société Générale.
Yves Perrier, currently chief executive of CAAM, will become chief executive of the new entity.
The combined entity could consider a stock exchange listing within a five-year timeframe.
There is a lock-up agreement between Crédit Agricole S.A. and Société Générale of at least five years.
"Given the rapidly evolving financial services sector landscape, banks are having to review their business models,’ says Georges Pauget, chief executive of Crédit Agricole. ‘The agreement we have signed with Société Générale is based on industrial logic, seeking to combine production efficiency with the power of distribution. This combination reflects the strategic logic of the Crédit Agricole business model, which is based on an overall approach from product design to market launch.
"In the recent period of market turbulence, our asset management business has demonstrated its resilience. As the market stabilises over time, we believe it has the capacity for further development and contribution to group results.’
Frédéric Oudéa, chief executive of Société Générale adds: "This major transaction will create a European leader in asset management, capable of tackling all the new challenges faced by the industry. Our common distribution platform will benefit from a critical mass, with direct access to more than 35 million individual clients in France. It will have all the relevant attributes to become an industry leader and play a role in the market consolidation."
The signature of a final agreement between Société Générale and Crédit Agricole is subject to consultation with the relevant employee representation groups and to the approval of the relevant regulatory authorities, and the various joint-venture partners.
