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Take it or leave it

2 November 2015 By John Foley

Amundi, as an asset manager, is acutely sensitive to the calibration of market prices. Yet where its initial public offering is concerned, owner Credit Agricole <CAGR.PA> can afford to brush such matters off with a Gallic shrug.

The biggest attractions of Amundi are its scale and efficiency. Costs are just 53 percent of its total revenue, below most of its peers – partly because two-fifths of its assets pertain to low-maintenance funds from its owners’ insurance businesses. While the majority of its 952 billion euros of assets under management are bonds, and thus exposed to risk from higher global interest rates, Amundi has seen inflows even as fixed-income funds have experienced the opposite. Most of those now come from outside France.

The price, meanwhile, isn’t too insouciant. Lop off the company’s 1.3 billion euros of surplus capital, and the remaining stub would be valued at 12.5 times forward earnings at the mid-point of its suggested range. Amundi would be priced at roughly a 15 percent discount to rival Schroders. By comparison, Credit Agricole paid around 14 times forward earnings last year – not including the effect of any surplus capital it then held – to raise its stake by 5 percent.

That reflects the dynamics of who is selling, and for what reason. French lender SocGen <SOGN.PA>, which is selling its entire 20 percent stake, wants a clean exit.

Given the lack of new growth capital – no new shares are being issued – the possibility that surplus capital will be frittered on dubious acquisitions, and risks to the bond market, something closer to the bottom of the range may be more comfortable. At that price, Amundi offers a solid investment story. Credit Agricole, which will be left with control and a new acquisition currency, will be mostly unfazed either way. Bof.

 

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