Wealth manager St. James's Place set for UK blue-chip entry

* St. James's Place likely to get a place in FTSE 100

* Wealth manager expected to replace Tate & Lyle (LSE: TATE.L - news)

* FTSE quarterly rebalance to be announced on Wednesday

By Atul Prakash

LONDON, March 3 (Reuters) - Newly independent wealth manager St. James's Place is likely to join the index of leading UK firms for the first time this month after a storming share rally made it the top contender for promotion.

Freed from the strategic shackles of majority ownership by Lloyds Banking Group, which sold out in late 2013, the company has attracted shareholders with plans including its first acquisition.

That helped shares in the company, which manages money for wealthy individuals and families, rise 73 percent in 2013 and 37 percent since the Dec. 13 disposal by Lloyds to a life-time high of 883.5 pence last week.

Around 10 percent of that performance has come since St. James's said on Feb. 25 that it planned to buy Asia-focused Henley Group, an advisory business with around 400 million pounds under management and 4,000 expatriate clients in Hong Kong, Singapore and Shanghai.

This is a tentative first step in a possible long-term expansion including to other regions with large British expatriate communities such as the Middle East.

"Lloyds' move to sell its stake in the company has partly been a driver for the share price appreciation. The other reason is that its business has done very well," David McCann, director of equity research at Numis Securities, said.

"The operations momentum can continue, but I think it is more than factored in the share price now."

The 19 percent run-up in the company's stock price year to date contrasts with a 3 percent gain for the FTSE mid cap index and a slight decline for the blue-chip FTSE 100, opening the way for St. James's Place to join the top 90 London-listed firms in terms of market capitalisation.

According to FTSE rules, any company rising to the 90th place or above is automatically added to the FTSE 100 index, relegating the company at the bottom of the list - on current indications, food ingredients firm Tate & Lyle - to the mid-cap FTSE 250 index.

Final decisions on reshuffling the FTSE 100 will depend on Tuesday's closing prices and will be announced on Wednesday. The changes will come into effect at the close on March 21.

A promotion to the main list would fuel further demand for St. James's Place shares from funds that track the FTSE 100 or use it as their benchmark, analysts said.

After rising for five straight years, St. James's Place could make it six in a row on flows of new funds from clients looking to protect nest eggs from the ravages of low interest rates as they near retirement.

Bolstering its appeal to shareholders, it has announced a 50 percent increase in its 2013 dividend and flagged a likely further 30-40 percent hike in 2014.

By contrast, shares in Tate & Lyle slipped 22 percent this year to touch their lowest in more than two years on Monday.

The company, which sells sucralose under the Splenda brand and other ingredients to packaged food and drink makers, recently cut its profit outlook, citing a dramatic drop in prices of its artificial sweetener, partly due to competition from cheaper rivals in China.

Tate could be automatically deleted from the FTSE 100 because it sits at the bottom of the index after weaker shares shrank its market capitalisation by 27 percent in one year.

The other company that could join the main index is Barratt Developments, while Amec (Other OTC: AMCBF - news) becomes vulnerable to a demotion to the midcaps.

Small cap companies Just Retirement Group and Hochschild Mining (Other OTC: HCHDF - news) could find a place in the FTSE 250 index, possibly by knocking down Edinburgh Dragon Trust and Kenmare Resources (LSE: KMR.L - news) to the small cap index. (Editing by Simon Jessop/Ruth Pitchford)