(Bloomberg) -- Henderson Group Plc agreed to buy Janus Capital Group Inc., creating a $320 billion money manager as both companies seek to boost profit and assets in the face of rising competition from passive managers. Henderson’s shares surged the most in more than seven years. The combined firm, Janus Henderson Global Investors Plc, will have a market value of at least $6 billion, the Denver and London-based companies said in a statement Monday. Japanese insurer Dai-ichi Life Holdings Inc., Janus’s biggest shareholder, will hold a 9 percent stake in the combined company and plans to increase that to at least 15 percent, according to the statement.
Active managers that specialize in stock and bond picking have been losing market share to lower-fee indexers in recent years. Janus Chief Executive Officer Richard Weil has sought to diversify the business through acquisitions, new fund offerings and overseas expansion. In 2014, he hired Bill Gross from Pacific Investment Management Co. to manage its Global Unconstrained Bond Fund, which now has $1.5 billion in assets.
“The groups complement each other,” Mark Dampier, head of investment research at Hargreaves Lansdown Plc, said in a note to clients. “Scale can help keep costs down for fund groups, allowing them to offer more competitive fund pricing while still delivering good active performance.”
Shares Surge
Henderson’s shares surged as much as 20.2 percent, the most since January 2009, and were trading at 266.7 pence at 1 p.m. in London. Janus investors will receive 4.719 new Henderson shares for each share they hold. Henderson investors will own 57 percent of the new company, with 43 percent going to Janus shareholders. The deal is expected to close in the second quarter of 2017.
Henderson CEO Andrew Formica said talks with Janus started in February, before the U.K. vote to leave the European Union, which saw investors pull more money from U.K. funds than any equivalent period in the global financial crisis. Brexit “didn’t accelerate the deal, nor did it have any impact,” he said.
“We have been on the path for globalizing our business” for five years, Formica said in a telephone interview. “The issue is, however, that costs continue to escalate from regulatory change and the continued effect from passive investing having an impact on margins. It’s about getting more global to get scale in the market.”
Formica and Janus’s Weil will together lead the merged entity, which is expected to generate annual net-cost savings of at least $110 million, according to the statements. The one-off cost from the synergies will probably be $165 million to $185 million and include some redundancy payments, Formica said on a call with analysts.
U.K. Resident
The combined company, one of the 50 largest asset managers in the world, will be headquartered in London and be a U.K. tax resident. Formica said that while the deal fits the description of corporate inversion, it will not reduce the tax bill in the U.S.
The company expects to boost net new money by an extra two to three percentage points as a result of the integration, according to the statement. The firm will apply to have its primary listing on the New York Stock Exchange because of its liquidity, with a secondary listing in Australia as that appeals to Asian investors. Janus Henderson will not trade on the London Stock Exchange because of the costs involved.
“This is a transformational combination for both organizations,” Janus’s Weil said in the statement on Monday. “Janus brings a strong platform in the U.S. and Japanese markets, which is complemented by Henderson’s strength in the U.K. and European markets.”
Henderson, named after its first client and founded in 1934, managed about 95 billion pounds ($122.6 billion) as of June 30. Janus, named for the two-faced Roman god, managed almost $195 billion.
--With assistance from Komaki Ito. To contact the reporters on this story: John Gittelsohn in Los Angeles at [email protected] ;Kathleen Chu in Tokyo at [email protected] ;Sarah Jones in London at [email protected] To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at [email protected] ;Margaret Collins at [email protected] ;Neil Callanan at [email protected] Michael Shanahan