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US-BASED investment management firm T Rowe Price Group (TRP) has acquired a 26% strategic stake in UTI Asset Management Company (AMC) and UTI Trustee Company for Rs 650 crore.

The deal values India’s oldest mutual fund house at Rs 2,500 crore, or about 3.6% of its assets under management.

The NYSE-listed firm has acquired a 6.5% stake from each of the existing four sponsors of UTI AMC — State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank.

Consequent to this stake sale, the existing sponsors will now retain a stake of 18.5% each in UTI AMC.

"UTI will be henceforth evaluated as an organisation before this day (January 20, 2010) and after this day,” said UK Sinha, CMD of UTI Asset Management Company.

Commenting on the relationship, James AC Kennedy, CEO and president of T Rowe Price Group, said: “We are confident that UTI and T Rowe Price will be a powerful combination. Our respective management teams, cultures and values fit very well together.”

The UTI AMC board has been reconstituted, with directors James S Riepe and Flemming Madsen representing TRP been inducted on the AMC board.

"The most compelling force behind this relation is because of the strong management team of UTI AMC,” said Edward C Bernard, vice-chairman, T Rowe Price Group.

As of December 31, 2009, UTI MF managed about Rs 78,000 crore across its debt and equity schemes, and is the fourth-largest fund house in India in terms of assets under management. Total assets managed by T Rowe Price group of companies worldwide stood at $366 billion as on September 30, 2009.

"We expect significant synergies in fund management, research, product development and technology with T Rowe Price and look forward to offering sophisticated products and services to our investors,” Mr Sinha said.

T Rowe Price has already initiated the integration process with UTI MF. Last week, the head of Global Equities and of international equities spent couple of days in UTI’s offices meeting with management and every member of the equity team to gain understanding of the staff, organisation and investment processes. Besides, two of its fixed income professionals had a similar visit. Technology and operation management from both firms have also begun collaboration discussing UTI investment systems, data management and hardware. TRP’s sales and marketing professionals are collaborating on several opportunities to raise assets outside India.

The advantage for T Rowe Price is that it will get a toehold in the fast-growing Indian mutual fund industry, besides being part of the most profitmaking as well as most profitable domestic fund house.

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