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June 30, 2014 3:44 pm
Henderson Global Investors announced plans to buy Geneva Capital Management on Monday in a $200m deal that will strengthen the Anglo-Australian group’s business in the US.
The acquisition is a significant milestone for Henderson as it gives it control of Geneva’s $6.3bn of assets in mid and small-cap US equities and builds on the hiring of a team of US fixed income specialists last year.
Andrew Formica, chief executive, said: “We have doubled our business in the US in just two years. This may be a small acquisition but it is the next big step for us as we seek to diversify our business.” Henderson, dual-listed in Australia and the UK, is paying $130m up front with $45m linked to revenue retention and $25m linked to growth-related earnings.
The deal was largely praised by analysts, who said the price was reasonable and fitted the group’s strategy to diversify into the US market.
Citi said: “The deal should allow Henderson to marry its own strong US retail distribution and developing global platform with Geneva’s strong institutional presence.”
Henderson’s traditional strength has been in European equities, which amount to about 20 per cent of the group’s more than £70bn in assets under management (AUM). Its other core areas of investment are global equities, global fixed income and multi-assets and alternatives.
With the purchase of Geneva, Henderson’s US assets under management will rise to $18.3bn, which is just under 15 per cent of the group’s AUM.
Mr Formica wants to grow US AUM to 20 per cent of the company’s total. In May, Henderson for the first time saw its US mutual fund range reach $10bn, with net inflows of $1.4bn so far this year.
The deal comes after Henderson reported record profits and inflows in February. It announced underlying pre-tax profits of £190.1m in 2013, a rise of 24 per cent on the previous year. The group also increased its AUM to £75.2bn to the end of last December, an increase of 13 per cent compared with the previous year. Mr Formica wants to double AUM to £130bn over the next five years. After recent property divestments, AUM is £72.5bn.
It also follows the acquisitions of New Star in 2009 and Gartmore in 2011 and should help Henderson strengthen its position as the “go to” house for equity income. This is a product offering Mr Formica has been developing over the past two years as baby boomers look for income in retirement. Henderson’s shares rose 1.82 per cent to 240.80 by 3.20pm. The transaction is expected to close on October 1.
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