Is MFS in a deal-making mood? The buzz surrounding the firm is growing louder, loud enough even to catch the attention of InvestmentNews. The trade paper reported Monday that the stock of Sun Life Financial (MFS' parent company) is climbing because of the widespread speculation (last month the MFWire reported that MFS officials are possible considering a merger or buyout of a rival, but not a sale of the firm).

In the past two weeks shares of Sun Life have risen some 9 percent to $40.45 on Friday's close. The stock hit its 2006 low of $37.10 on August 10. However, the talk of a possible deal involving MFS has been going through the fund community since early summer, well before Sun Life shares hit their low.

On of the possible partners named in the earlier MFWire article was Denver-based Janus Capital Group. That name surfaces as a possible partner for the firm in the InvestmentNews article also. Analysts also mention Franklin Resources as a possible partner that would allow Sun Life to retain a stake in MFS.

Sun Life would be reluctant to part with its stake in MFS because the sale would have a costly tax fallout. However, the fund firm also needs to add scale to maximize its value to the insurer. MFS had $168.2 billion in assets under management at the end of June. That represents a relatively small increase from the $147.4 billion it managed at the end of 2000.

However, Wall Street analysts following the firm report that they are hearing Sun Life is a seller, not a buyer -- a rumor that makes no sense to those inside the fund industry.

"The perception is that Sun Life can significantly improve [its] earnings if [it] can improve MFS' margins," Mario Mendonca, an analyst at Toronto-based investment bank Genuity Capital Markets told InvestmentNews. "If they can't improve MFS' margins, they are better off selling it and taking back a percentage of ownership."

He added that people would be surprised if Sun Life emerged as a buyer instead of a seller.

"The rumors they are hearing, and what they are banking on, is a sale, not a purchase," he told the trade paper.  

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