Man Group Plc (EMG.L,MNGPY.PK,MNGPF.PK) Monday said it has agreed to acquire the entire issued share capital of Jersey-based hedge fund research and investment specialist FRM Holdings Ltd., which has funds under management of nearly $8 billion. Upon completion, the combined business will trade under the FRM brand.
Peter Clarke, chief executive of Man stated, "This financially compelling transaction provides us with the opportunity to significantly improve the profitability of our multi-manager business. By combining the complementary investor bases of the two businesses and pairing FRM's well regarded investment process with Man's managed accounts infrastructure, we can increase revenues with no material change to Man's current cost base."
As per the scheme of arrangement, no consideration will be paid up front, while the contingent consideration is dependent on asset retention. The world's biggest public hedge fund said the deal is expected to be completed before the end of the current third quarter.
The contingent consideration, to be paid over three years, comprises a maximum of $82.8 million in cash, net of total net assets acquired and is dependent on asset retention. Further, the contingent consideration also comprises a 47.5 percent net performance fees generated from FRM's existing assets in the three years after closing, capped at $60.8 million, Man noted.
Man will pay an estimated $71.7 million in cash for an anticipated $102.9 million of net assets, representing a discount to book value of nearly $31.2 million, subject to completion of balance sheet adjustments.
It expects cost savings of $45 million per annum from the combined group, which is anticipated to generate double digit accretion to Man's adjusted management fee earnings per share in 2013.
The company plans to integrate FRM with its multi-manager business, which will have total funds under management of around $19 billion.
Following the acquisition, the combined business will be led by Luke Ellis, chief executive of Man Multi-Manager and previously managing director of FRM. Blaine Tomlinson, founder of FRM, will become non-executive chairman of the combined business.
EMG.L is currently trading at 79.18 pence, up 3.88 pence or 5.15 percent, on a volume of 4.35 million shares on the LSE.
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