Henderson Group yesterday snapped up American fund manager Geneva Capital Management, bolstering its exposure to the lucrative US money management market.
The group, led by chief executive Andrew Formica, will pay $130m (£75.9m) up front and an extra $70m depending on performance targets to take control of the 25-strong company, which runs $6.3bn mostly for US pension funds.
Henderson will fund the deal purely through cash on its balance sheet.
The deal, which will complete in October, boosts Henderson’s US assets from 10 per cent to 14 per cent of assets under management – building on strong sales by the group following $1.4bn of US inflows so far this year.
The deal, worth a multiple of about 7.2 times earnings on the initial up front cash offering, adds to a spate of consolidations in the sector.
Last week, Man group took control of Boston-based hedge fund Numeric while Bank of Montreal took control of UK funds group F&C Asset Manage-ment earlier this year.
The group has previously boosted its US presence in the credit space – taking on high-yield and investment- grade analysts stateside – but the push into US equities achieves Formica’s bid to add a mid-cap footprint in the US.
Henderson, which is listed on the FTSE 250, will retain the Geneva brand but co-brand a number of products as Geneva-Henderson to recognise the tie-up. Shares in the group, which was founded nearly 100 years ago to run the financial estate of railway investor Lord Faringdon, rose 1.9 per cent.
“This deal strikes us as a positive one, which should, when completed, lead to modest earnings upgrades and increased potential growth from the US,” Bank of America Merrill Lynch analyst Philip Middleton said.
The first $130m tranche will be banked by Geneva while a further $45m will depend on five year revenue targets plus an additional earn of $25m over five years.
INTERVIEW: ANDREW FORMICA
The US is often hailed as the land of opportunity and for Henderson chief executive Andrew Formica the well-worn sentiment has some resonance. “We recognise the need to have on-the-ground domestic capabilities in the US,” he told City A.M. “If you’re going to be really successful and be a global asset manager you have to be in the US. We started that process a year ago when we hired a credit team and then equities was the next big thing.” Henderson first got to know Geneva eight months ago when both sides started exploring a tie-up but it was only in the past two months that talks became serious. “I’ve been looking for an equity business for three or four years and trying to find one that really is culturally aligned with us and shares our vision” Formica said.
“We agreed the terms and then they never changed. We recognised the interests of both parties and the right alignment. It was very smooth because both parties have such a similar culture.” After the deal completes on 1 October, Geneva will retain its brand but co-brand with Henderson in a bid to preserve the recognition of its current customer base and boost the presence of Henderson among the powerful US institutional investment funds. “We do believe we can get some revenue synergies,” Formica added. “We think we can accelerate our penetration into the US thanks to Geneva and help them sell outside of the US, which they’d never even looked at before because they’d never had the resources to do it. There are opportunities to accelerate the growth at the top line level because of this transaction.” Investors agreed – shares closed up 1.9 per cent.