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Thursday, October 12, 2006

MFS Sale Talk Heats Up

by: Sean Hanna, Editor in Chief

Talk about who is in the bidding for SunLife's MFS fund arm is growing too loud to ignore. This week published reports placed Pittsburgh's Mellon Financial in the lead for the Boston-based fund manager and added the name of another possible suitor to the mix. The initial report of a possible Mellon bid came on Tuesday in the Pittsburgh Post-Gazette. The television network CNBC followed with a report that Mellon had bid roughly $3 billion and was hoping for the deal to be finished in the next few weeks.

A later Bloomberg report added Wachovia's name to the mix as another interested bidder. Fund industry sources have also told the 401kWire that BlackRock, Ameriprise and T. Rowe Price had also made runs at the firm, while published reports have also tied Franklin Resources to the bidding. However, the word additional sources have since said that T. Rowe Price dropped from the auction after the news of the sale broke last month.

The 401kWire published the first story on a possible sale of the firm at the end of July and later broke the news that Ameriprise and T. Rowe Price were in talks with MFS on September 11. SunLife confirmed that it was shopping MFS on September 14. None of the firm's reportedly involved in the talks will comment on the rumors sweeping the industry. However, T. Rowe Price officials stated on September 14 that the fund firm is not in any talks with MFS.

Word that Mellon is the top bidder conforms to industry chatter that has been making the rounds of former-MFS employees since early last week. According to those sources, Mellon is hoping to have a deal in place and to inform MFS employees by November 3. However, the sources providing the information do not have first-hand knowledge of the talks and are passing along what they heard.

Both the CNBC and Bloomberg reports do not identify sources and the Bloomberg story is based on one source "familiar with the situation."

One major issue in the negotiations, according to sources with knowledge of the negotiations, is how much of a stake SunLife would retain in the firm after a deal is completed. All of the bidders a publicly-owned companies and want to minimize the stake retained by SunLife.

Meanwhile, for 401(k) partners the deal will likely only have a minimal impact; SunLife purchased the MFS Retirement business from MFS earlier this year and has since placed its own management at the head of the plan recordkeeper and administrator. That unit will not be a part of any MFS sale and will remain a part of SunLife. 

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