More will follow Henderson and Janus mega-merger

Anglo-Australian asset manager Henderson Group is jumping into bed with American fund manager Janus Capital in a $6 billion merger of equals. Forced together by low industry organic growth and margin pressures, the pair will make massive costs savings and fatter profits, they say.

As Janus Henderson Global Investors, the new company - 57%-owned by Henderson shareholders and 43% Janus - will have assets under management of over $320 billion (£249 billion). On a pro forma basis about 54% will be invested in the US, 31% in Europe, Middle East and Africa (EMEA), and 15% in the Pan Asian region.

There'll be annual cost savings of "at least" $110 million, on top of benefits from Henderson's ongoing five-year plan. The new savings should be realised within three years and cost $165-185 million to implement, we're told. Expect the deal to complete in the second quarter of 2017 and boost both earnings per share (EPS) by double digits.

Henderson chief executive Andrew Formica and Denver-based Janus CEO Dick Weil will run the new company together. But, while the business will have a London headquarters - a relief given the UK's decision in June to leave the EU - the shares will only be listed in New York and Australia.

Janus' largest shareholder, Dai-ichi, backs the merger. It will own 9% of the combined group, but has said it will increase its stake to "at least 15%".

Interactive Investor's head of investment Rebecca O'Keeffe called today's deal "a significant move for the active fund manager market".

"In the current low interest rate environment, we have already seen investors move towards passive funds in an effort to reduce their overall costs. This move has increased pressure on active managers to provide clear evidence of their value.

"Active managers are going to have to continue to work hard to convince investors of their relative value, but consolidation in the industry could help."

David McCann at Numis Securities thinks further deals are inevitable. Aberdeen, Jupiter, Intermediate Capital and Liontrust are all mooted as possible targets. But he doubts anyone will try and gatecrash this merger.

"This looks like a 'done deal'," he says, "with scope for cost and in theory revenue (distribution) synergies, from bringing together one US focussed and one European focused business.

"In that regard, we think it appears to be a sensible deal, given the increased scale, relatively minor front office overlap and scope for cost and distribution synergies."

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