12 Jan 2011
The consolidation trend among asset managers has swallowed up another firm with the confirmation that Henderson Group has reached agreement to buy Gartmore in an all share deal worth about £370 million. The transaction closes a troubled 13 months for Gartmore after it listed on the London Stock Exchange in December 2009 at 220 pence per share.
The combined business will feature around $10 billion in hedge fund assets under management out of total funds under management of $122 billion. This will see the Henderson-Gartmore hedge fund arm shoot up to eighth position in The Hedge Fund Journal’s Europe 50 table of the continent’s largest single managers ranked by AUM. It means that the new combined hedge fund arm will trail GAM (which ranked seventh at June 30, 2010 with AUM of $13.18 billion) and slot in ahead of Sweden’s Brummer & Partners (which ranked ninth with AUM of $8.64 billion).
Investors in the listed shares of Gartmore and Henderson both gave a thumbs up to the transaction which had been officially acknowledged by the companies just before Christmas (when Gartmore’s stock actually fell.) Today, the reaction to the deal, which will see Gartmore shareholders get two shares of Henderson for every three of their shares, was unambiguously positive. The share price of Gartmore jumped 12% to 101.4 pence, while Henderson rose 9.8% to 151.7 pence.
One reason for the uptick in the combined valuation of both companies is that analysts believe the new entity should be able to deliver a 10% earnings gain in the first year following completion of the transaction. Part of this will no doubt come from redundancies in combining the work forces as well as eliminating duplication in such things as the (lower) cost of running one public company instead of two. It is also possible that Henderson’s higher profile in the UK asset management sector will provide a halo effect, helping some of Gartmore’s funds to boost money under management.
For shareholders in Gartmore as well as investors in its funds the deal ends the uncertainty that had become attached to the asset manager in recent months. It is true that investors in Gartmore shares will be crystalling losses but they will be paid Henderson’s final dividend next month and will retain a stake in a big asset manager that should grow in the years ahead. Meanwhile, investors in Gartmore funds can take confidence from the fact that fund managers responsible for 84% of its assets are joining Henderson to continue managing money. Thus John Bennett (who succeeded Roger Guy in running Gartmore’s European equities hedge and long only funds) is to play a similar role following the acquisition.
Aside from scale, the outlook for the combined hedge fund operation looks encouraging. Investor choice will expand as each side’s hedge funds are, in the main, complimentary rather than overlapping. Thus Gartmore’s large cap European equities hedge funds differ fundamentally from Henderson’s key Asia Pacific, Japan and Global Equity Multi-Strategy offerings. What’s more, putting together the two wings should see best practice prevail in risk management, investor communication and regulatory compliance. In sum, the end product should be positive for investor choice and investment performance.
The combined business will feature around $10 billion in hedge fund assets under management out of total funds under management of $122 billion. This will see the Henderson-Gartmore hedge fund arm shoot up to eighth position in The Hedge Fund Journal’s Europe 50 table of the continent’s largest single managers ranked by AUM. It means that the new combined hedge fund arm will trail GAM (which ranked seventh at June 30, 2010 with AUM of $13.18 billion) and slot in ahead of Sweden’s Brummer & Partners (which ranked ninth with AUM of $8.64 billion).
Investors in the listed shares of Gartmore and Henderson both gave a thumbs up to the transaction which had been officially acknowledged by the companies just before Christmas (when Gartmore’s stock actually fell.) Today, the reaction to the deal, which will see Gartmore shareholders get two shares of Henderson for every three of their shares, was unambiguously positive. The share price of Gartmore jumped 12% to 101.4 pence, while Henderson rose 9.8% to 151.7 pence.
One reason for the uptick in the combined valuation of both companies is that analysts believe the new entity should be able to deliver a 10% earnings gain in the first year following completion of the transaction. Part of this will no doubt come from redundancies in combining the work forces as well as eliminating duplication in such things as the (lower) cost of running one public company instead of two. It is also possible that Henderson’s higher profile in the UK asset management sector will provide a halo effect, helping some of Gartmore’s funds to boost money under management.
For shareholders in Gartmore as well as investors in its funds the deal ends the uncertainty that had become attached to the asset manager in recent months. It is true that investors in Gartmore shares will be crystalling losses but they will be paid Henderson’s final dividend next month and will retain a stake in a big asset manager that should grow in the years ahead. Meanwhile, investors in Gartmore funds can take confidence from the fact that fund managers responsible for 84% of its assets are joining Henderson to continue managing money. Thus John Bennett (who succeeded Roger Guy in running Gartmore’s European equities hedge and long only funds) is to play a similar role following the acquisition.
Aside from scale, the outlook for the combined hedge fund operation looks encouraging. Investor choice will expand as each side’s hedge funds are, in the main, complimentary rather than overlapping. Thus Gartmore’s large cap European equities hedge funds differ fundamentally from Henderson’s key Asia Pacific, Japan and Global Equity Multi-Strategy offerings. What’s more, putting together the two wings should see best practice prevail in risk management, investor communication and regulatory compliance. In sum, the end product should be positive for investor choice and investment performance.
