Once the deal is done EFM’s money will be split between Aberdeen and New Star Asset Management.
Aberdeen, which has an institutional business in Australia, will take over Edinburgh's institutional funds and investment trusts for a net cost of just £3 million of its shares, while New Star will bag Edinburgh's retail unit trusts and its respected funds of funds operation.
It is unknown at this early stage what the sale means for people with money in funds managed by EFM, Aberdeen is buying the EFM for just £36 million in a share-only deal.
"The low price and share only offer reflects the difficulties Edinburgh has suffered of late including the recent defections of head of UK equities Robert Waugh and his colleague Peter Cockburn to rivals Scottish Widows Investment Partnership," First NZ Capital UK listed investment company specialist Peter Irwin says.
“It has also lost the investment trust management contracts on the Edinburgh Small Companies Investment Trust, the Edinburgh Worldwide Investment Trust, and, most importantly, last summer the Edinburgh investment trust.”
In its announcement on Friday EFM announced that it has taken a hit of £3.1 million for advice about its breaches of 'technical aspects' of New Zealand securities law. No provision has been made for the liability, which could conceivably be as much as £5.8 million. (See Good Returns’ earlier story Costs of Edinburgh's securities law breach balloons
"The deal marks the end of a very sorry period for EFM," Irwin says. The company’s shares have collapsed from more than 700p three years ago to less than 70p earlier this year.
In the mid-1990s EFM was a leading force in Scottish fund management as it bought Dunedin Fund Managers.
"For Aberdeen, which appears to have pulled off a disguised rights issue, and New Star, which has picked up the unit trust and funds of funds business at a cost of less than 4% of the assets under management acquired, the deal looks like a good one."
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