Sun Life Attracts Suitors in Effort to Unload MFS

Sep 18, 2006 4:01 PM, By Kevin Burke

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MFS Investment Management, long rumored to be on the auction block due to lagging profit margins, middling performance and increasing regulatory demands, could be mere days away from a blockbuster merger with another large asset-management firm, according to published reports.

The chatter surrounding the nation’s oldest mutual fund firm ignited over the weekend when reports from The Toronto Globe and Mail and the Boston Business Journal, named as many as five possible suitors, including T. Rowe Price, Franklin Resources, Putnam Investments, Nuveen Investments and Ameriprise. MFS parent, Toronto-based insurer Sun Life Financial, confirmed today that it has hired Morgan Stanley to advise on strategic alternatives.

“Sun Life Financial continually reviews the performance of all of its businesses to deliver and grow shareholder value,” said a Sun Life release on the topic. “The company values MFS as a strategic asset and remains committed to growing the business organically while assessing strategic alternatives. The company has retained investment bankers to advise on strategic alternatives. However, there is no assurance that a transaction will result.” A SunLife spokesman could not be reached for additional comment at press time. John Reilly, an MFS spokesman, said, “Our policy is not to comment on speculation.”

But one industry insider notes that T. Rowe Price would be a great fit for MFS in that it would juice sales among brokers and certified financial planners. “It would totally salvage their reputation in the broker/dealer channel as a direct marketer in competition with the b/d channel, an image that still lingers today,” says Louis Harvey, president and CEO of Boston-based research firm Dalbar. MFS, the 25th largest mutual fund shop in the U.S., with $168 billion in assets, would be catapulted into the top 10 in a merger with T. Rowe Price.

T. Rowe would also help shore up MFS’ fixed-income and international fund groups. “At the end of the day, more brokers would sell T. Rowe Price funds,” says Harvey. A T. Rowe spokesman did not return phone calls seeking comment.