GLOBAL - Crédit Agricole and Société Générale have signed a preliminary agreement to combine their asset management operations.
SGAM AI will be folded into Lyxor, which will remain within Société Générale.
It is understood a merger would make the combined entity the 4th largest asset manager in Europe and the 9th on a global basis.
Crédit Agricole will take a 70% stake in the combined business and Société Générale will hold the remaining 30% stake.
The two firms said the combined entity could consider a stock exchange listing within a five year timeframe.
The new entity will have €638bn of assets under management (as at September 30, 2008), more than €1.8 billion of net banking income and €0.9 billion of gross operating income.
Société Générale will appoint one third of directors of the new board. The chairman of the new entity's board will be appointed by Crédit Agricole and the vice-chairman by Société Générale.
Yves Perrier, the current chief executive of CAAM, will become chief executive of the new entity.
Crédit Agricole chief executive Georges Pauget said: "Given the rapidly evolving financial services sector landscape, banks are having to review their business models. The agreement we have signed with Société Générale is based on industrial logic, seeking to combine production efficiency with the power of distribution. This combination reflects the strategic logic of the Crédit Agricole business model, which is based on an overall approach from product design to market launch.
"In the recent period of market turbulence, our asset management business has demonstrated its resilience. As the market stabilises over time, we believe it has the capacity for further development and contribution to group results.
"Finally, this combination confirms the common strategic vision of both groups as regards the future of the asset management industry."
Société Générale chief executive Frédéric Oudéa added:"Our common distribution platform will benefit from a critical mass, with direct access to more than 35 million individual clients in France. It will have all the relevant attributes to become an industry leader and play a role in the market consolidation. Given our combined focus on putting clients' needs at the heart of this transaction, we believe the networks of Société Générale both in France and abroad will find that the new entity is even better positioned to serve their retail and institutional clients even more efficiently."
The signature of a final agreement between Société Générale and Crédit Agricole is subject to consultation with the relevant employee representation groups and to the approval of the relevant regulatory authorities, and the various joint-venture partners.
Crédit Agricole S.A. was advised by Calyon, Morgan Stanley, and Sullivan & Cromwell. Société Générale was advised by Société Générale Corporate & Investment Banking, JPMorgan and Shearman & Sterling.
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