Word on Strong may come next month
Firm hopes to break news on its future then, Pension Board told
By KATHLEEN GALLAGHER [email protected], Journal Sentinel
Thursday, January 22, 2004
Strong Financial Corp.’s top executive is telling people that the firm expects to make an announcement about its future by early February, an investment consultant told members of the Milwaukee County Pension Board Wednesday.
Strong chairman and chief executive Kenneth Wessels made the projection late last month in a meeting in Chicago with Mercer Investment Consulting, the pension fund’s investment consultant.
“He thought that by the end of January or early February they would be able to come out and tell us who” Strong was looking to be acquired by, said Mercer consultant Brad A. Blalock. “I think that timetable is still there.”
Wessels did not appear before the Pension Board as scheduled Wednesday because of a schedule conflict.
The board oversees the $1.4 billion Milwaukee County employee pension fund and has been meeting with Strong every month to monitor its $121.2 million fixed-income account with the firm.
Blalock’s comments on the timetable echoed other recent statements about Strong, which has hired Goldman Sachs Group Inc. to hold an auction for the company.
There are a “handful” of parties interested in buying Strong, and the entire deal could be wrapped up as soon as the end of the first quarter, a source with knowledge of the negotiations said.
Strong executives have said a sale of the Menomonee Falls-based company is not its only option.
“In the future, it’s either going to be a stand-alone entity or it’s going to be joined with a strategic partner,” said F. John Baranko, managing director of Strong’s institutional business. It’s “too early” to tell which it will be, he told the Pension Board.
The Wall Street Journal and The New York Times reported two weeks ago that at least seven firms have survived the initial round of bidding for Strong — four banks, two insurance companies and a brokerage firm.
The banking companies they named are Bank One Corp., Chicago; Wells Fargo & Co., San Francisco; KeyCorp, Cleveland; and Wachovia Corp., Charlotte, N.C. The insurance companies are New York Life and Delaware Investments, part of the Lincoln National Group in Philadelphia. Lehman Brothers of New York is the brokerage firm. Last week, Bank One said it had agreed to be acquired by J.P. Morgan Chase.
Strong allowed investigators from New York Attorney General Eliot Spitzer’s office into the firm last week, and Baranko said it continues to cooperate with regulators.
The total amount of money Strong has under management has dropped $5.2 billion since early September, when Spitzer implicated the Menomonee Falls-based investment firm in giving a New Jersey hedge fund opportunities to trade in Strong funds that other shareholders didn’t have.
Spitzer in late October accused Richard S. Strong of personally profiting from improper trading in his company’s mutual funds. Strong has said his trading was not disruptive to the funds, and Spitzer has not filed criminal or civil charges.
Strong had $38.1 billion under management as of Dec. 31.
“There are a lot of factors that go into this, but it appears as though our assets seem to be starting to stabilize,” Baranko said.
The firm had an “astounding” year in terms of performance in 2003, with nearly half its products performing in the top 25% of their Lipper peer groups, he said.
The firm’s institutional fixed-income management group has lost just five clients with about $300 million of assets, Baranko said.
“It’s been fairly good on the institutional fixed-income side, and the performance has stayed there,” Blalock said. “Nobody’s run for the door yet — I think they’re all kind of waiting to see what happens with this transaction.”
Richard Strong owns about 90% of the firm. He resigned Dec. 2 and turned control over to Wessels.
