US investment bank Merrill Lynch is to create one of the world's top fund management groups through a friendly takeover of Mercury Asset Management (MAM) for £3.1 billion sterling, which was unveiled yesterday.

By acquiring MAM, the largest British investment fund management group alongside Schroders, Merrill Lynch will increase funds under management by 65 per cent to $450 billion (£300 billion). This will put it in third place in the global fund management industry, behind Fidelity Investments of the United States and Groupe AXA of France.

"For Merrill Lynch, Mercury is an ideal strategic fit, and the acquisition represents a quantum leap towards our goal of becoming a global leader in the asset management business, one of the most attractive segments of the financial services industry," said Mr David Komansky, chairman and chief executive officer of Merrill Lynch.

Merrill Lynch offered £17 in cash per share in MAM. This represented a premium of 31.7 per cent on the MAM share price on Tuesday of £12.91.