British money manager Jupiter Fund Management JUP.L has agreed to buy rival Merian Global Investors for an initial 370 million pounds ($483 million) in shares, in a deal that will make it Britain's second-largest retail funds provider.
The acquisition brings Jupiter another £22.4bn of actively-managed assets taking its total assets under administration to more than £65bn.
Both firms have been hit by outflows from flagship funds in recent times but both remain significant players in the United Kingdom fund sector with Jupiter managing £65bn and Merian £22bn.
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Andrew Formica, Jupiter's chief executive, said: "This is an exciting acquisition that enhances our position as a leading United Kingdom asset manager, provides increased scale and diversification into attractive product areas, and creates stronger future growth prospects for the business".
Jupiter's shares rose as much as 10.4% in Monday morning trading in London, the most in more than six years. GAM Holding considered a sale a year ago and Julius Baer had plans to dispose of its asset manager Kairos. "It would have to be more of a bolt-on acquisition that really meant the Jupiter brand, culture, approach and strategy continued and was dominant". TA Associates, the private equity firm that helped Merian get off the ground and which was previously invested in Jupiter, will hold a stake of around 16%.
Merian shareholders will own approximately 17% of the enlarged share capital of Jupiter overall.
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Bloomberg had first reported on the talks. Andrew Formica made a number of acquisitions while chief executive of Henderson and he has already put this strategy to work after less than a year as CEO of Jupiter. He ran the flagship Jupiter European Fund as well as the listed Jupiter European Opportunities Trust Plc.
Shore Capital told investors to remain dubious about the Merian acquisition.
"Should this deal go through, it would continue the recent trend of active managers merging to try drive cost savings through their businesses to take the fight back to passive managers who are making inroads in the market and attacking asset managers revenues". "The deal looks defensive in nature - as did Standard Life Aberdeen - so we think investors should start from a slightly skeptical position".
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