Dutch firm to purchase mutual funds owned by O-I

3/22/2001

A Toledo-based family of prominent mutual funds, which has attracted investors nationwide, is being sold to a Dutch concern.

Robeco Groep N.V., of Rotterdam, has agreed to pay $490 million for Harbor Capital Advisors, Inc., which is rated the nation's 11th largest group of no-commission mutual funds by Morningstar, Inc. Harbor manages $14 billion in 12 investment funds for 120,000 customers.

The agreement was announced yesterday by Robeco and Harbor owner Owens-Illinois, Inc., which started the fund family in the early 1980s to manage the company's pension money. It has been the only mutual fund family based in Toledo.

The sale, which is subject to approval by Harbor's board of trustees, investors, and regulators in the United States and Europe, is expected to be completed in June.

A possible Harbor sale has been rumored for months as O-I scrambled to find cash to calm investors worried about its slumping stock, pay mounting asbestos-liability claims, and cope with lackluster profits. Executives said they will use proceeds to reduce debt that hit $5.9 billion Dec. 31.

A Robeco spokesman, reached in Rotterdam, said executives there are pleased with the pact.

“We think Harbor is a very good acquisition,” said the firm's Alexander Simons. “It's a profitable business that is doing well. We will help them to continue their growth strategy.”

The firm, a major Dutch banking concern that was founded in 1929 as an investment club by prominent Rotterdam businessmen, is impressed with Harbor's strategy of using outside experts to manage its range of funds.

The buyer expects to retain the firm's 65 Toledo employees and keep its offices at O-I's One Seagate downtown headquarters. “The way we deal with our daughters - our corporate subsidiaries - is that we want them to do business the way they have done it in the past,” explained Mr. Simons. “If it isn't broke, don't fix it.”

A key issue for investors will be whether the buyer will be able to retain prominent investment strategists such as Spiros “Sig” Segalas, who manages the $8.3 billion Harbor Capital Appreciation Fund, and Hakan Castegren, manager of the $4.7 billion Harbor International Fund.

They are Harbor's two largest funds and have a reputation for being well-managed and delivering solid returns. Both funds have been battered by the slumping stock market with returns slipping into the red this year, but over the past five years have delivered solid annual returns of 9 to 16 percent,

Neither manager plans to leave, O-I spokesman John Hoff said.

“There is always uncertainty when you have a new owner,” Mr. Segalas said. “But I'm positively disposed.” Harbor has done well with a limited sales staff, but an infusion of new cash and personnel could help Harbor introduce investment funds and begin seeking customers in Europe, he added.

Current customers probably won't notice the change in ownership, said Julie Higgins, a partner at Trust Co. of Toledo, Inc., which invests money in Harbor's stock, bond, and money-market funds for individuals and institutions.

“We're not looking for much in the way of change at all,” she said.

“This is truly one of those events that is good for all parties,” added James Williams, Harbor president. “Owens-Illinois has been a very good parent company, but they are in the packaging business. Financial services is Robeco's core business.”

The sale will allow O-I to concentrate on its core business, said the spokesman from Toledo's second-largest corporation. O-I will combine the money it expects to receive from the sale with claims payments from asbestos insurers and proceeds from the sale of other, unspecified assets to reduce debt by $700 million by June 30.

The Harbor purchase is part of a strategy by Robeco to become Europe's 15th-largest asset manager. The firm is ranked 30th now.

Other U.S. holdings include New York-based Weiss, Peck & Greer, which manages $20 billion primarily for wealthy individuals and large institutions.

A stipulation of the agreement between O-I and Robeco will provide the Dutch firm with a break on the sales price if there is a large imbalance between deposits and withdrawals by investors. Ordinarily, that wouldn't be a big deal. But in today's slumping stock market, with investors becoming increasingly anxious about the future, that could come into play, investment experts caution.

Robeco's spokesman said the firm isn't concerned about a recent decline in investment returns offered by several Harbor funds. The largest fund, Harbor Capital Appreciation, has dropped by more than 16 per cent since Jan. 1. The company believes the funds are well-managed and will rebound, Mr. Simons said.

Rebeco officials made several trips to Toledo as they decided whether to complete the purchase, code-named Project Blade. The firm's spokesman isn't sure how the name was selected, but speculated it may have something to do with Toledo's links to Toledo, Spain, a historic center of sword production.