Friends Provident has few options in F&C stake sale

By Laurence Fletcher and Simon Challis

LONDON (Reuters) - Options look limited for Friends Provident as it considers offloading its majority stake in F&C Asset Management, though a break-up may be attractive to rival fund firms keen to beef up assets.

Selling the 140 year old investment firm has been made more difficult by volatile stock and credit markets, which have made the outlook for fund management companies less appealing and made potential buyers more reluctant to spend on big deals.

"They've couldn't have chosen a worse time to try to offload an asset manager," said a senior executive at a rival insurer.

While several firms have opted for private equity-backed management buyouts (MBOs) -- last year Jupiter was bought by TA Associates and Jupiter senior management, while in 2006 Hellman & Friedman Advisors backed Gartmore's management in an MBO -- the credit crisis has made private equity buyers more wary and finance harder to obtain.

"The preferred route would be an MBO. The only problem is that existing management are struggling to find appropriate finances at this time. I suspect they've made enquiries, but it's not a viable option at the moment," said Landsbanki analyst Samir Shah.

Hellman & Friedman is not interested in backing a management buyout at F&C, a source close to the buyout firm said.

Meanwhile, trade buyers, many of whom will be more concerned with keeping costs down and stemming outflows in current market conditions than hunting for a big deal, have so far failed to surface for F&C (FCAM.L), which cut its dividend and is part way through a turnaround plan to boost earnings and stop funds ebbing away.

Aberdeen Asset Management (ADN.L), whose track record of acquisitions means its name has topped the list of potential suitors for F&C, has said it is focused on bolt-on acquisitions, not large deals.