Marsh & McLennan Companies Inc., the nation’s largest insurance broker, has selected a buyer for its Putnam Investments mutual funds and investment management division, according to a report last Friday.
Marsh & McLennan had reached an “agreement in principle” to sell the Boston-based unit for $3.9 billion to Power Corp. of Canada, a Montreal-based company that controls one of Canada’s leading mutual fund firms, IGM Financial Inc., the Wall Street Journal reported.
A spokesman for Marsh & McLennan, based in New York, declined comment on the report, as did Nancy Fisher, a spokeswoman for Putnam Investments.
An official with Investors Group Inc., a division of IGM Financial, also refused to discuss the report, saying, “We don’t comment on rumors and speculation.”
But people familiar with the negotiations said the Journal report was accurate.
Putnam employs more than 3,000, mostly in the Boston area.
Earlier this month, Marsh & McLennan’s chief executive, Michael G. Cherkasky, told an investor’s conference he expected a decision on the sale of Putnam by the end of 2006, but acknowledged the timetable could slip into 2007.
Marsh & McLennan has been under pressure to spin off at least one of its businesses since 2005, when it agreed to pay $850 million to settle allegations of bid rigging and price fixing in the sale of property and casualty insurance to businesses. Part of the settlement was an agreement by Marsh & McLennan to stop accepting special commissions, which has reduced its operating revenue and hurt profitability.
Donald Light, senior analyst with Celent, a Boston-based financial research and consulting firm, said the report on the Putnam deal suggested that Marsh & McLennan was doing well on the sale.
“The reported price, $3.9 billion is on the high side,” Light said in a research note. “So the winner here might be Marsh & McLennan. It can use the extra capital to continue finding ways to restore the profit margins of its Marsh brokerage unit, and to rebuild the margins of its Mercer employee benefits group.”
If Putnam is sold, Marsh & McLennan will be left with three major divisions: Marsh risk and insurance services, Kroll risk consulting and technology, and Mercer Human Resource Consulting.
The deal still must be approved by Putnam employees who own shares in the company, Putnam mutual-fund shareholders and the board that oversees the funds, the Journal said.
Other companies reportedly interested in Putnam were Amvescap PLC of the United Kingdom and UniCredito Italiano SpA of Italy.
Putnam had regulatory problems of its own. The company paid more than $190 million to settle federal and state investigations launched in 2003 into mutual fund trading abuses.
Investors upset with the market-timing scandal pulled their assets out of Putnam accounts, reducing the mutual fund company’s holdings from $251 billion at the end of 2002 to $182 billion at the end of September. After months of declines, the company announced its first positive investment inflows in October, boosting assets under management to $187 billion.
AP Business Writer Mark Jewell in Boston contributed to this report.
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