MAM chief backs cheaper underwriting

Hugh Stevenson, chairman of Mercury Asset Management, yesterday backed moves to introduce competition into the underwriting commissions charged for rights issues, as Schroders launched its second cut-price financing in five days.

Schroders auctioned 36 per cent of the underwriting for a pounds 48.6m rights issue for More Group, the outdoor advertising company, to help fund the acquisition of Swedish advertising group Wennergren Williams. The auction saved the company pounds 109,000 - 11 per cent of the commissions - at the expense of investing institutions such as MAM.

The move follows a similar auction for Stakis, the hotels group, last Thursday, which saved 8 per cent. It is an attempt to head off a Monopolies and Mergers Commission inquiry into high City underwriting commissions.

Mr Stevenson said: "We welcome anything that gives a freer system for underwriting." He said that as long as pre-emption rights were upheld, giving existing shareholders first call on new issues, "we are ready to participate in the process of change".

Reporting interim profits at MAM 29 per cent higher than a year earlier at pounds 81.8m before tax, Mr Stevenson made clear that the fund management group could be in the market for acquisitions.

There was speculation that MAM's sharply increased cash pile, up pounds 72m to pounds 262m in six months, could be used to finance a bid in the US market, following the announcement of the proposed takeover of Texas-based AIM by Invesco.

Mr Stevenson said: "The US is an important market. It's the biggest savings market in the world but value for our shareholders is the main aim."

MAM has built up its cash pile over the past six months from pounds 191m to pounds 261m. Mr Stevenson said that the company preferred a conservative balance sheet. Funds under management rose from pounds 81bn in March to pounds 85.9bn in September, including pounds 2bn of net new business and 40 new mandates to manage money purchase pension schemes.

The figures suggest MAM will slip into second place among independent UK fund managers, behind Invesco, when its takeover of AIM goes through. The merged company, Amvesco, will have pounds 91bn under management at present dollar exchange rates.

MAM declared an interim dividend of 10p a share, compared with last year's 6p, but the sharp increase was to reduce the imbalance between the interim and final. An increase in provisions for bonus payments for staff was responsible for part of the pounds 22m increase in operating costs to pounds 104m over the past 12 months. The shares fell 20p to 1122.5p.

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