Gartmore grabs Govett for £14m

Gartmore Investment Management has snapped up Allied Irish Bank's loss-making fund management division Govett Investments for a snip, but fund mergers and significant job losses are to follow.

Gartmore will pay just £4 million up front for £1 billion in funds, with this rising to around £14 million over three years, based on funds retained and management fees earned over the period.

The disposal closes a sorry chapter for AIB, which purchased Govett for £101 million in 1995. AIB will be hit by a one-off business closure cost of £12 million and will write-down £97 million in goodwill as a loss in its 2003 accounts.

AIB (ALBK) confirmed the decision would cost around 70 jobs, including fund managers involved in the retail funds to be transferred. Gil Knight, the veteran US manager of the Govett US Growth unit trust is the only manager to survive and his external management contract with Baltimore-based Allied Investment Advisors, which will be transferred.

AIB said the Asian crisis of 1997 to 1998 crippled Govett's business, which is largely focussed in Asia, and despite 'substantial restructuring' the business lacked the scale and was not expected to return to profitability in the near future.

Noel McEvoy, chief executive and chairman of Govett told Citywire that despite the repositioning measures and a recent upturn in Asian markets, the actions had 'not been enough' to get the business back into the black.

Meanwhile, Paul Feeney, head of UK retail funds at Gartmore told Citywire the group plans to retain three funds in the unit trust range, but would look to merge the remaining 17 funds in the first quarter of next year.

Gartmore will assume a total of £625 million in retail investment funds, £250 million in investment trusts and £150 million in institutional mandates, all of which will transfer to Gartmore on Monday.

The boards of Govett's six investment trusts have confirmed they will transfer their management contracts to Gartmore following the deal.

These include the Govett Asian Income & Growth trust, the Govett Asian Recovery trust and the Govett Singapore Growth trust, which will all be managed by Philip Ehrmann.