Nikko in talks to buy DBS Asset Management

Japan's Nikko Asset Management is in "serious" talks to buy DBS Asset Management in a deal that would also involve DBS Group buying a small stake in Nikko, three sources said yesterday.

The combined entity could be managing about US$145 billion ($190.4 billion) in assets. The deal is a sign of ongoing consolidation in the fund industry, where size has become increasingly important amid rising costs and falling fees for mutual funds.

"The bottomline is that the more assets under management, the more efficient you become," said Mr Trevor Kalcic, a banking analyst at RBS in Singapore.

"It is a really a case of scaling of the business whether in terms of fund management, marketing or negotiating reduced commissions from brokers," he said.

The size of the deal was not immediately known but industry sources and analysts said it could be a few hundred million dollars or around 2 per cent of the $26 billion managed by DBS Asset Management. 

Nikko manages about US$125.2 billion in assets.

"Nikko has already made an offer," one of the sources with direct knowledge of the deal told Reuters. Another said that Nikko is not the only group DBS is speaking with. The sources declined to be named because the talks are not public.

DBS declined to comment on the talks with Nikko but said it was exploring various options for its asset management arm.

A DBS spokesman said: "Asia is creating wealth faster than anywhere else in the world and against this backdrop, a key priority for DBS is to build a leading regional wealth management franchise."

DBS CEO Piyush Gupta has targeted wealth management as a key plank of his growth strategy and partnering Nikko could make its asset management arm a bigger proposition for wealthy clients.

"In line with this, DBS is exploring various options, including a possible strategic partnership for its asset management arm, to enable the business to have better intermediate burgeoning wealth flows in Asia," the spokesman added.

Nikko also declined to comment on the talks. Nikko, part of Sumitomo Trust and Banking, is keen to expand outside Japan and recently hired Mr Blair Pickerell as head of Asia from Morgan Stanley Investment Management. REUTERS