River and Mercantile to sell pensions business to Schroders for $316.3 million

(Reuters) -Fund manager River and Mercantile Group said on Tuesday it would sell its pensions business to Schroders Plc for 230 million pounds ($316.30 million) as it focuses on its primary asset management business.

River and Mercantile (R&M) shares surged 20% in morning trade to a 20-month high of 295 pence on the news. Schroders shares were up 1%.

The R&M board said it has decided to recommend the Schroders offer for the Solutions business, which has assets under management worth 42 billion pounds and serves more than 100 clients, mainly trustees of pension schemes.

R&M said its CEO James Barham would continue to lead the Solutions business and would also play a broader management role at Schroders once the deal is completed. He will be succeeded by Alex Hoctor-Duncan as R&M's boss.

The company said it intends to return the majority of proceeds to investors, and will consult with shareholders regarding the amount.

It said it would retain sufficient funds towards planned development of its faster-growing and more profitable asset management business.

In July, Schroders, one of Britain's biggest fund managers, reported a jump in first-half profit and record-high assets under management of about $978 billion as low interest rate environment bolstered money managers.

"This acquisition further enhances our ability to meet the increasingly complex needs of pension fund clients and is consistent with our growth strategy," Schroders CEO Peter Harrison said in a separate statement. ($1 = 0.7272 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Anil D'Silva, Carolyn Cohn and Jane Merriman)