SocGen in talks with Amundi, State Street over Lyxor fund arm sale

LONDON: Societe Generale is in advanced talks with both France's Amundi and US firm State Street to sell its Lyxor asset management unit as part of efforts to boost profitability, four sources told Reuters.

Amundi and State Street are finalising rival bids for the French bank's fund business after other interested parties dropped out over its valuation, the sources said.

Lyxor is being valued at about half the 1 billion euro ($1.2 billion) it was targeting, with bidders only willing to offer about 400-500 million euros due to growth challenges and fallout from the coronavirus crisis, the sources said.

German asset manager DWS and US financial services firm Northern Trust were the latest to walk away, the sources said, speaking on condition of anonymity.

This left Amundi and State Street as the only contenders for the SocGen business, which had 164.4 billion euros in assets under management and advisory as of February.

SocGen, State Street, Amundi and DWS declined to comment, while Northern Trust was not immediately available for comment.

SocGen, France's third biggest bank, is in the midst of a shake-up after the COVID-19 pandemic dented its revenues from retail banking to trading, tipping it into its first full-year loss for a decade.

'TRICKY CARVE-OUT'

SocGen's chief executive Frederic Oudea launched a strategic review of Lyxor last year and hired Citigroup to sound out potential bidders, the sources said, adding advisers are working flat out to create a standalone business.

"It's a tricky carve-out and it will take time before the unit can be disentangled from the rest of the bank," one said.

Lyxor, which ranks as Europe's third largest ETF provider, had about 82.3 billion euros of assets under management in exchanged-traded funds (ETF) as of February, representing half of its operations.

But three of Lyxor's funds featured in Morningstar's top 20 worst performing European-domiciled ETFs in February 2021.

For Amundi, Europe's biggest asset manager, a combination with Lyxor would be a natural fit.

But the French funds firm, which had 1.7 trillion euros of assets under management at the end of 2020, is unlikely to pay up for a business which is not seen as a game-changer, the sources said.

State Street is actively pursuing a deal in Europe in an effort to boost its presence in the region where it held talks with Swiss bank UBS last year about a possible combination of asset management businesses, another source said.