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Henderson buys $6.3bn US equity manager

Henderson buys $6.3bn US equity manager

Henderson Global Investors has strengthened its US business with the acquisition of Geneva Capital Management (GCM).

Henderson will pay an initial $130 million (£76 million) for GCM plus an additional $70 million linked to performance-related measures.

GCM, which was founded in 1987, controls $6.3 billion in assets. Henderson’s existing global US business has seen assets under management double since 2011. In May 2014 the fund group hit $10 billion for the first time in its history on the back of $1.4 billion in inflows.

Following the acquisition Henderson’s US business will account for nearly 15% of the group’s assets under management.

Henderson said GCM’s expertise in mid and small cap equities ‘fills an important capability gap’ for the firm.

It said the deal would double the number of US investment professionals at Henderson and offer the opportunity to roll out new retail products, while marketing its capabilities more actively to US institutions.

Henderson chief executive Andrew Formica (pictured) said: ‘Developing our presence in North America is a strategic priority for Henderson. The acquisition of Geneva is a major step towards achieving our growth ambitions as a global asset manager.

‘It will increase our assets under management in the US by over 50%, add investment management expertise in US equities and extend our US institutional client base.’

Amy Croen, co-founder and managing principal of GCM, added: ‘The team at Geneva is excited to join Henderson.

‘With the backing of a strong international partner who is very supportive of our existing investment strategy and platform, we look forward to taking our business to the next stage of its development.’

Market reaction

Shortly after midday shares in Henderson were 0.25% higher at 237p.

The purchase was met with a measured reception from Bank of America Merrill Lynch, which repeated its neutral rating on the stock and 260p price target.

In a note, analysts Philip Middleton and Frank Podrug said while the deal should significantly boost Henderson's US growth and makes it a more 'attractive' as company, it is unlikely to translate into major upside in the share price.

'Whilst not transformational, this deal seems to make sense strategically and financially. In strategic terms, it provides diversification by product, geography and channel,' the pair said.  

'Whilst it is relatively easy to make deals look accretive with current interest rates, Henderson looks to be paying an earnings multiple which suggests the deal would stack up even if funded with equity.'

Barclays was less enthusiastic, reiterating its underweight on the stock.

While the bank sees the purchase as fitting with Henderson's strategy, it highlighted a worrying decline in assets at GCM, which fell by 6% in 2014 after a strong rise in 2013.

 

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