Janus Capital and the Henderson Group Come to Merger Agreement
In what many are considering a smart move, the Henderson Group of London and Janus Capital based in Denver have concluded that the wisest decision is for the two companies to merge on the heel of the headwinds the asset management sector is experiencing.
The merger will lead to the creation of a group that manages assets worth $320 billion and reminds of the days when Henderson took advantage of poor market sentiment during the 2008 Global Financial Crisis and bought two asset management companies, namely Gartmore and New Star Asset Management.
Andre Formica, Henderson’s CEO, almost purchased RidgeWorth, a US asset management firm, in 2010. Not coincidentally, New York’s BlackRock rewrote their prospects in 2009 by buying out Barclays Global Investors, based in the UK. At the time, the main interest was in iShares, which Barclays had in their portfolio.
Formica stated he would be removing the UK listing for a quote for Janus Henderson in New York, which might result in more deals for the company in the United States.
Richard Weil, CEO of Janus Capital since 2010, along with Formica have to know that the active managers in their firms will have to deal with quite a few obstacles regarding tech costs, weak returns, and stronger regulations.
Just a couple of days ago, analysts were worried that Henderson would have to deal with an increase in their minimum regulatory capital after Aberdeen Asset Management received a call from the Financial Conduct Authority. The regulator has not yet informed Henderson of their decision, but news of the merger will certainly make things easier on the firm.
Active funds on either side of the pond have suffered due to independent consultants advising their retail clients to go with cheaper passive funds. The fact that institutions across the world are dropping active equity funds and opting for other alternatives and solution providers, including bonds, hasn’t helped either.
Weil and Formica are looking to work together to market the best products they have to each other’s client bases while streamlining the rest of their product listings. The companies are expecting savings in operational costs of $110 million after the merger and are hoping that regulators will take it easier on them, considering they are decreasing gearing as they will be using shares to finalize the merger.
The merger will result in quite a few opportunities, one of which is the excellent European equity team working for Henderson will get a little more cross-Atlantic advertising. Intech, which is owned by Janus and was short-listed in the FN Asset Management Awards list of 2016, has a record that shows it’s capable of making $100 billion, without taking into account the $50 billion it already has. Henderson also made the list.
Bill Gross, Janus’ Bond star who is quite discriminatory, is in favor of the deal, said Formica. Gross trusts Weil as he worked with him at Pimco Advisory where Weil was in charge, and Gross made his name. Kumar Palghat, Gross former co-manager who also used to work as a Pimco executive, will be promoted to fixed income chief in the company resulting from the merger.
Janus’ biggest shareholder, Japan-based Dai-ichi Life, will be increasing their stake from 9% up to 15% in the newly merged company. The quality of the deal and market sentiment is proven by the 12% increase in the trading price of Henderson’s shares before 10 AM.
The party could be ruined by an interested third party putting in a bid, considering that Henderson and Janus are not offering a premium to their shareholders. However, Formica is confident no one will be able to throw a spanner in the works of this deal between two people-based companies, and there is a chance he’s on to something.
This deal overlaps with another merger taking place between MassMutual’s asset management firms in the Barings stable. It’s also taking place at the same time as various strategy reviews from other asset managers as they decide how to overcome the obstacles they are dealing with.
We could be looking at more mergers taking place in the new future. Moreover, in a move that will shock the world after years of trying so hard, even Italy’s Pioneer Investments might be able to finalize a deal.