Canadian insurer to buy Putnam

Canadian insurer Great-West Lifeco Inc. said Thursday that it would buy money manager Putnam Investments from Marsh & McLennan Cos. for $3.9 billion in a bid to gain a key foothold in the U.S. asset management market.

“The company has been reviewing for some time its strategic positioning in the U.S.,” Raymond McFeetors, Great-West Lifeco’s president and chief executive, said during a conference call. “We’re a top 10 player with this acquisition.”

Great-West, a Winnipeg, Canada-based division of Power Financial Corp. of Montreal, expects the acquisition to add to its earnings before restructuring charges in the first year.

Both boards have approved the transaction, and they expect it to close in the middle of this year. Boston-based Putnam will keep its name and existing management, investment, distribution and service teams.

The sale followed longtime pressure from Marsh & McLennan’s investors to shed the underperforming unit.

Putnam has suffered from rising redemptions and poor performance by its top funds, and some analysts doubted that a deal would go through. Its assets are down to $192 billion from about $371 billion in 2000.

Assets started falling during the bear market of 2000-02. Despite the stock market recovery, the decline continued as Putnam was charged with fraud in an industrywide market-timing scandal that hit in 2003. Putnam settled by agreeing to pay about $193 million in fines and restitution.

Putnam management says it has a plan that will return operating margins to industry norms. McFeetors said he expected fund flows to turn positive this year.

At a news conference in Toronto, Putnam President and Chief Executive Charles Haldeman said net fund outflows in the first half of 2006 were $12 billion, but that fell to $3 billion in the third quarter. He said he expected a “marked improvement” in the fourth quarter.

The $3.9-billion sale price was in line with recent news reports, but toward the lower end of initial estimates of how much Putnam would fetch when Marsh & McLennan said in September that it was considering a sale.

Putnam is one of New York-based Marsh & McLennan’s four major divisions; the others are the Marsh insurance brokerage unit, risk consulting unit Kroll Inc. and human resources consulting company Mercer.

Marsh shares rose 44 cents to $29.94.