This week, London-based asset manager Henderson Group agreed to acquire its US-based rival Janus Capital Group Inc. This is a $6 billion, all-share deal aimed at cutting costs and boosting profits as the company begins to face increasing competition from index fund growth.
Indeed, this merger may also just be one of many as more small and mid-sized players in the industry are looking to gain scale and to better streamline operations as well as diversify their revenue streams as a means to protect profits. With clients wanting lower fees and regulators weighing down more scrutiny of fund manager practices, the new reality has boosted speculation over the potential for more tie-ups in this industry.
Indeed, Henderson Chief Executive Andrew Formica notes, “The combined product line-up will be much more balanced and diverse,” adding that the management group already had strength in both the British and European markets; Janus, of course, had strong business in the United States.
While the deal is “all-share”, the merger will also involve a share exchange, through which, each Janus share will be exchanged for 4.719 new Henderson shares. Basically, the deal would boost share earnings by more than 10 percent.
Shore Capital analyst Paul McGinnis comments, in a client note, “We see this as a positive move with complementary asset bases and a very material cost synergy figure.” In addition, Cantor’s Keith Baird similarly notes, “may kick off a round of merger speculation involving other asset managers such as Jupiter.”
The combined company will be known as Janus Henderson Global Investors and will have its headquarters in London, where where it will manage, in total, $320 billion in assets. This could, then, make it the 39th largest asset manager in the world. The two firms also said they are targeting an annual cost savings of no less than $110 million, according to Henderson chief financial officer Roger Thompson.
When all is said and done, Formica and Janus CEO Dick Weil be a co-chief executive of the joint firm. As could be expected, too, with news of the merger, shares of both companies surged: Henderson shares increased by 17 percent while Janus shares rose 11 percent, in Monday morning New York Stock Exchange trading.