Shares in embattled fund manager Gartmore were on the back foot on Monday, after confirming it is in talks to be taken over by rival Henderson.
Gartmore said late on Friday it had entered into talks with Henderson on the basis of a proposal priced at "a slight discount" to Gartmore's closing share price of 98.75p on 16 December, valuing the company at £360 million.
"Henderson's proposal is conditional. No terms have been agreed and there can be no certainty that a transaction would proceed on the basis set out in Gartmore's announcement," the fund manager said.
Henderson's shares were down initially, amid concerns that the deal would deflect management focus from a long-established intention of expanding its business overseas, but moved ahead in late-morning trading.
Gartmore, which floated just a year ago at 220p per share, has lost several key staff in recent months.
Roger Guy, boss of Gartmore's flagship European Large Cap fund management team retires after 17 years at the company and chief investment officer Dominic Rossi has left to join rival Fidelity.
"2010 has been a difficult year for the company," admitted chief executive Jeffrey Meyer last month. "The board has therefore appointed Goldman Sachs to evaluate the strategic options available to the firm. These may include the possibility of a sale or merger."
Analysts at Numis Securities gave Henderson a 'hold' rating in a note, saying the potential deal was "contradictory to previous intentions of expanding in the United States and Asia and now may limit expansion plans there."
Numis also said market regulator Financial Services Authority may investigate Henderson's holdings in Gartmore: "We believe there is some risk of a regulatory investigation into the way in which certain Henderson funds (which hold about 12% of Gartmore) have acted - in particular increasing the stake in Gartmore post the Guy retirement announcement - and how they conduct themselves during the offer period."
This article is from Interactive Investor