Marsh & McLennan's chief executive said the company sold off its Putnam investment unit because the $4 billion price was right and a spin-off would probably have crippled the new company with debt.

During a conference call held this morning to discuss the sale of New York-based MMC's Putnam investment fund arm, Michael G. Cherkasky, president and chief executive officer of the company, said, "If it hadn't been this kind of price it could have been a different decision for us."

He said the capital infusion will allow the firm to make future acquisitions.

MMC, the parent company of insurance brokerage firm Marsh Inc., sold Putnam Investments for $3.9 billion to Great-West Lifeco Inc., a financial services holding company controlled by Canada-based Power Financial Corporation.

The deal is expected to close in the middle of the year and is subject to regulatory approval.

The all-cash deal will be paid through a combination of loans and management investment, said Raymond McFeetors, president and CEO of Great West Lifeco, during a news conference held later.

Mr. Cherkasky said the decision to sell Putnam came about after the company received several unsolicited bids for the firm. There was also a strategic decision made that MMC needed to concentrate on risk and human capital services, and the investment firm did not fit in with those plans.

A spin-off of Putnam would not have been in the best interest of shareholders, said Mr. Cherkasky, because the stand-alone company would have been burdened with too much debt and would not be in a strong financial position to survive a downturn in the markets.

Putnam, ranked the tenth largest investment firm, handled $192 billion in assets under management by the end of 2006, MMC said. In 2003 the Boston-based firm was investigated for trading abuses and saw investors pull $4 billion in funds. The next year the company paid $50 million in fines.

For its part, Mr. McFeetors called it a remarkable acquisition at 14.5 times multiples. The deal also includes Putnam's 25 percent stake in T.H. Lee Partners, a private equity firm, and tax benefits the company plans to securitize for $550 million.

The deal includes no transfer of debt to Great-West. According to Capital IQ, MMC currently lists its debt at $5.08 billion on its balance sheet.

During the conference call, MMC executives would not state how much debt Putnam would have been saddled with in a spin-off.

Mr. McFeetors' description of the sale price caused criticism from at least one analyst who questioned whether MMC got sufficient value.

Mr. Cherkasky responded that the sale would not have taken place if the company had not gotten the price it was looking for.

"We know we won," he said. "We believe it is a great transaction for us, and they believe it is a great transaction for them."

Mr. Cherkasky indicated that besides paying down debt and buying back stock, the sale will also allow MMC to begin making acquisitions. He did not indicate when such deals would be taking place.

Ed Hardeman, president and CEO of Putnam, speaking during the Great-West news conference, said the management team will remain intact and that the fund will show significant improvement in the fourth quarter when MMC releases its financials. Mr. McFeetors said Putnam will act as a separate company with its own board of directors.

Mr. Cherkasky announced MMC would consider a sale of Putnam in September after months of denying the company had any interest in doing so. Earlier this month, reports began to circulate that a deal between Great-West and MMC was in the works, but there was no acknowledgment of the prospects until today.

Special Reports /

MMC: Price Was Right For Putnam Sale

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