| Thu 14 Mar 2002, 0:00 | | Realignment Of Pilgrim Baxter & Associates, Ltd W |
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OLD MUTUAL PLC
ISIN CODE: GB0007389926
SHARE CODE: OML
ISSUER CODE: OLOML
Realignment of Pilgrim Baxter & Associates, Ltd
("Pilgrim Baxter") within Old Mutual plc
Old Mutual plc ("Old Mutual") today announces that it has agreed to
restructure the residual 20% revenue share interests in its key US mutual
fund business, Pilgrim Baxter, through the payment of $175m plus an earn-out
over five years if profits growth exceeds 7.5% per annum.
Pilgrim Baxter is the US-based retail and institutional fund manager
acquired by Old Mutual through the purchase of United Asset Management
("UAM") in September 2000. This restructuring involves replacing the
residual revenue share retained by Harold Baxter and Gary Pilgrim (the
"Principals") in Pilgrim Baxter.
This restructuring consolidates Old Mutual's interest in the prosperous US
retail asset management market and has a number of benefits to Old Mutual:
* Finalises the restructuring of Pilgrim Baxter after the expiry of the
previous option to reorganise the Principals' residual interest.
* The bottom line-orientated earn-out structure aligns the interest of Old
Mutual and the Principals in maximising growth and profits. It also
simplifies the structure for advancing the development of Pilgrim Baxter as
the key retail component in Old Mutual's asset management strategy in the
United States.
* Elimination of the revenue share strengthens Pilgrim Baxter's existing
incentive plan and hence its ability to retain and attract talented
investment professionals.
The financial terms of the restructuring involves replacing the 20% revenue
share of the Principals with the following elements:
* Three fixed payments of $58.3m, payable in March 2002, February 2003, and
February 2004. In respect of each payment, Old Mutual can elect to pay
$16.7m in its own shares, however the first payment will be made in cash.
* Five annual earn-out payments, due in February 2004 - 2008, if profits
growth, exceeds 7.5% per annum from a base of $53.6m. If profits growth is
a constant 15% per annum then each yearly payment would be $18.2m. The
payments are capped at $68.2m annually if profits growth is equal to, or
greater than, 30% per annum.
Jim Sutcliffe, Chief Executive, Old Mutual plc, commented:
"We are delighted to have concluded these arrangements and so completed the
restructuring of our US asset management businesses. Pilgrim Baxter is well
placed to accelerate its growth, and successfully expand its platform, in
the all-important US market."
14 March 2002
ENQUIRIES:
Old Mutual plc, London: Tel: +44 (0)20 7569
Jim Sutcliffe, Group Chief 0100
Executive
James Poole, Investor Relations
Director
or South Africa:
Bruce Allen, Group Media Tel: +27 (0)21 509 2446
Relations
College Hill, London: Tel: +44 (0)20 7457
Tony Friend 2020
Nicholas Williams
Hewes Communications, New York: Tel: +1 212 207 9451
Tucker Hewes
Notes to Editors
In November 2000, Old Mutual partially restructured the UAM Revenue Sharing
agreement with Pilgrim Baxter and as a result of this arrangement an option
was put in place for Old Mutual to pay a total of $420 million (or approx.
GBP291 million) in satisfaction of the Principals' residual revenue sharing
rights. This option was not exercised by Old Mutual and expired in December
2001. As a result, the Principals were entitled to a 20% revenue share in
the business of Pilgrim Baxter for a period of 10 years.
Pilgrim Baxter is a US-based asset manager with assets under management of
$12.6 billion as at 31 January 2002 and annualised revenues of approximately
$109 million, based on the three months ended 31 January 2002. The business
has a market leading range of retail mutual funds with over half of the
firm's Morningstar - rated portfolios having achieved four-or five-star
ratings.
Pilgrim Baxter has recently added five new high quality investment styles
and asset classes to its flagship PBHG mutual fund family. All five of the
new portfolios are sub-advised by other Old Mutual investment managers.
Pilgrim Baxter has recently established substantial sub-advisory
relationships to manage portfolios for the mutual fund groups of three large
financial services organisations - American Skandia Life Assurance, American
Express, and Wachovia Corporation's First Union Securities. The sub-advised
portfolios encompass both growth and value investment styles.
