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U.S. insurer buys Gartmore
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March 30, 2000: 7:08 a.m. ET
Royal Bank sells fund manager to Nationwide Mutual for $1.6B
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LONDON (CNNfn) - U.S.-based Nationwide Mutual Insurance agreed Thursday to pay £1.03 billion ($1.64 billion) in cash for the Gartmore fund management arm of Royal Bank of Scotland, well above the expected sale price.
Royal Bank auctioned Gartmore, which manages about £60 billion in assets, after acquiring the unit through its £21 billion takeover of National Westminster Bank last month.
Scotland's largest bank "got a good price for Gartmore, more than some industry analysts had anticipated," said Andrew Hobson, an analyst at Capel Cure Sharp in London. The sale price crept up from an early estimate of around £500 million. More recently analysts expected £800 million.
Nationwide Mutual, a unit of Columbus, Ohio-based Nationwide Financial, beat out competition for Gartmore from prospective buyers including South African insurer Old Mutual (OLM), U.K. insurer CGU (CGU) and Dutch bank ABN-Amro.
The deal is the largest U.S. foray into the fast-growing European fund management business since Merrill Lynch (ML: Research, Estimates) acquired Britain's Mercury Asset Management for $5.3 billion in 1997.
 Nationwide, which manages assets of more than $100 billion, already operates in 37 countries and said the Gartmore buy was part of its plan to develop a global asset management business. "The acquisition of Gartmore gives us immediate scale and global brand name credibility," Nationwide Chairman Dimon McFerson said in a statement.
Nationwide said it plans to retain Gartmore's present management team in London.
Gartmore has changed hands several times in the past decade. U.K. financial services group British & Commonwealth, which is now defunct, sold Gartmore to Banque Indosuez of France for about £132 million in 1990. NatWest acquired the fund manager in 1996 for £472 million.
Royal Bank is offloading Gartmore as part of a series of asset sales and cost cuts planned as it integrates NatWest. The bank aims to complete the sale by the end of June.
"It's good to see the disposal program is on track," Capel Cure's Hobson said. "Royal Bank was taking on a lot of risk (by buying NatWest) and the market has been discounting the shares ahead of possible disposals and any potential cost savings."
Royal Bank shares (RBS) rose more than 3.9 percent to 882 pence in London by midday Thursday. Hobson has a "hold" rating on the stock and a price target of 940 pence.
In the U.S. the previous day, Nationwide (NFS: Research, Estimates) stock closed at down 1/8 at 27-1/4. 
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