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Morgan takes fund co. stake
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July 30, 1997: 10:41 a.m. ET
J.P. Morgan pays $900M for 45 percent of American Century mutual funds
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NEW YORK (CNNfn) - J.P. Morgan & Co. said Wednesday it agreed to buy a 45-percent stake in American Century Cos. -- the nation's fourth largest no-load mutual-fund company -- for $900 million.
Morgan also agreed to enter into a business partnership with American Century, which manages about 70 mutual funds with some $60 billion in assets.
The agreements underscore the importance that Morgan has placed on marketing mutual funds, as well as retirement accounts.
Currently, Morgan manages $234 billion of assets, but mutual funds make up only about 10 percent of that.
"Our business partnership with American Century will accelerate the growth of our asset-management business," Morgan Chairman Douglas Warner III said in announcing Wednesday's deal.
The two firms said their first joint initiative will focus on marketing defined-contribution employee-pension plans involving mutual funds.
The two companies also plan to focus on personal-financial services for private-banking clients.
Plans call for the deal to close in four to six months, pending approval by both boards and regulators.
Upon closure of transaction, two Morgan executives, Ramon de Oliveira, chairman of the firm's Asset Management Services business, and Edward J. Kelly III, managing director, will join American Century's board.
J.P. Morgan will also have certain management rights, as well as an option to increase its equity interest by an unspecified amount.
However, terms guarantee that American Century founder James Stowers Jr. and his family will retain voting control over the company.
Analysts generally endorsed Wednesday's deal.
"Growth in mutual-fund assets and growth in defined-contribution assets are growing at about twice the pace of Morgan's traditional business -- the defined-benefit market," said Larry Vitale, banking analyst at Bear Stearns. "This deal gives (Morgan) an avenue to participate in some of that better growth."
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