Fremont Investment Advisors may have a buyer in hand. Multiple industry sources have told the MFWire that Affiliated Managers Group (AMG) is near completion of a deal to buy the fund firm. The San Francisco-based Fremont has been on the block since at least January 2003 when the Fremont Group's Rick Kopf, managing director of operations, told the MFWire of the search for a buyer.

Neither officials from Fremont nor officials from AMG would comment on the rumors that the two firms are close to a deal.

A year ago Kopf said that the Fremont Group was selling the fund firm because the fund industry had matured and it was seeking to liquidate its private equity stake. At the time Fremont also announced that E. Douglas Taylor had replaced placed Nancy Tengler as CEO while the firm prepped for a sale.

Last fall Fremont was faced with a twist in the sales process when it admitted that it had entered into an agreement with an investor that allowed market timing in its funds. That admission could present an issue or possible liability for a buyer.

Fremont sponsors 13 mutual funds. At year-end 2003 the funds held roughly $3.1 billion in assets and Fremont claimed $5.6 billion in total assets under management. Fremont employs 36, according to its Web site.

AMG specializes in purchasing investment management firms and running them as affiliates. The Prides Crossing, Massachusetts firm currently has 17 affiliates located across the United States.

In other news on Monday, AMG said that will sell $250 million of mandatory convertible securities ("PRIDES") and, simultaneously, repurchase approximately 1.7 million shares of its common stock.

AMG officials said they intend to use the proceeds of the sale to repurchase up to an additional 1.0 million shares of its common stock under a newly-authorized share repurchase program. In aggregate, AMG intends to repurchase approximately the same number of shares as will be required to satisfy the forward purchase contracts of AMG's outstanding PRIDES in November 2004.

"The PRIDES have the effect of extending the maturity of our obligations with a new, six-year senior note and a forward equity purchase contract due in February 2008," said Darrell W. Crate, executive vice president and chief financial officer. "The impact of the PRIDES transaction and the share repurchases will be to offset the share issuance related to our outstanding PRIDES this November."

Each PRIDE consists of both a forward purchase contract for a specified number of shares of AMG Common Stock and a senior, unsecured note. The securities were priced at $1,000 per unit, with an effective coupon of 6.65 percent and a conversion premium of 53 percent above AMG's closing stock price of $83.19 on February 6, 2004.

The PRIDES are being sold in a private placement. The purchaser, who AMG did not identify, has also borrowed and sold to AMG approximately 1.7 million shares of AMG Common Stock.  

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