The manager of the world's oldest investment fund has agreed to a £708 million takeover by Canada's Bank of Montreal.

F&C Asset Management, which traces it roots back to the formation of Foreign & Colonial Government Trust in 1868, said the deal provided a "unique opportunity to broaden and accelerate our ambitions".

The acquisition by BMO Global Asset Management - part of Bank of Montreal - brings together two firms with long-standing histories.

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F&C launched the first ever collective investment vehicle 146 years ago to raise money to invest in government bonds of foreign countries and colonial territories, while BMO is the oldest bank in Canada and has been operating in the UK since 1870.

The deal, which still needs shareholder approval, will double BMO's global fund management arm, adding F&C's £82.1 billion.

F&C said the 120p-a-share offer was just over 28% higher than Friday's closing price.

BMO said the UK and European markets were "strategically important" to it, while F&C boss Richard Wilson said both firms were "truly complementary", adding the offer was a "very positive outcome" for clients and employees.

F&C confirmed yesterday it was in advanced talks with BMO and was likely to recommend the all-cash offer, which sent shares surging by 25%.

The stock was up another 4% today.

The deal comes after a difficult past few years for F&C, whose stock price once peaked at 250p.

The group has suffered client outflows and underperformance, which led to a boardroom coup by US activist investor Edward Bramson in 2011.

He stepped down as chairman in August last year.

Mr Wilson said: "F&C has made significant progress in the last couple of years.

"We have developed new products, strengthened our distribution channels and reduced our cost base, putting the business in a strong position to move forward."

A separate trading update from F&C showed assets under management fell £8 billion during the quarter to December 31, while ongoing pressure in the wholesale business saw further net outflows of £104 million.

But it turned around the consumer and institutional business, with net inflows of £1.3 billion last year against outflows of £1.9 billion in 2012.

Life insurer Friends Provident owned 52% of F&C from 2005 until 2009, when it offloaded the stake to its shareholders as part of a demerger.