FRANCE - After two and half months of discussion, Caisse d’Epargne and Banque Populaire yesterday signed an agreement to merge their investment subsidiaries Natexis and Ixis - creating France’s second largest funds management company with assets of €534bn.

The new company, valued at around €25bn euros, will be called Natixis and partially floated with both sides retaining stakes of 34%.

With Ixis Asset Management already one of France’s largest institutional fund managers, after AXA Investment Management, and Natexis a mid-sized player, the newly merged group will become the 15th largest fund manager in the world and better able to compete internationally.

Ixis AM is best known for its bond funds and US subsidiaries while Natexis AM has a strong presence in monetary funds, company savings schemes and has recently built up its multi-manager business.

The merger is expected to shake up the asset management operations of both companies and, although many areas are complementary, there is still some overlap. A rash of job cuts could cause concern among institutional investors.

“History suggests that mergers, in very few instances, have been good for the end customer. In a few instances they have destroyed good parts of the fund management houses,” said Divyesh Hindocha, global director of consulting for Mercer Investment Consulting.

However, Dunny Moonesawmy, head of fund research at Lipper France said job cuts were likely to be avoided.

“Both companies are very French-oriented and it’s not in the French mentality to sack lots of people. When French companies merge they try not to fire people, they do it in a different way by not replacing retirees.”

Two years ago France saw a similar merger between Credit Lyonnais and Credit Agricole which created Calyon and another giant in funds management.

Although the Credit Lyonnais merger created a lot of tension and political fallout internally, Calyon is now a very respected and profitable business, particularly in equity derivatives.

In contrast Natexis and Ixis, both household names in France, are trying to shake off the perception of being asset management dinosaurs with a focus on money-market products.

This is largely due to their government-linked history, particularly for Ixis. Formerly CDC Ixis, the company was the asset management and investment banking arm of state-owned Caisse des Depots et Consignations. Despite this influence, it was able to build up a strong investment banking division competing fiercely on structured products.

However, its asset management division was less competitive, relying on its dominant position as the biggest institutional fund manager in France, largely due to its major shareholding in leading life assurance company CNP Assurance.

In France people have traditionally bought long-term savings products via life insurance companies but the government is gradually trying to change this by creating new stakeholder-style personal pensions that can by sold by other institutions.

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