Jupiter Fund Management has announced plans to acquire Merian Global Investors in a deal worth £370m, which would make it the second-largest retail asset manager in the UK.
The move would give Jupiter combined assets of £65bn with Merian viewed as a complementary and additive acquisition, giving it further capabilities in areas such as UK all-cap growth and UK small- and mid-cap.
Top Merian strategies include the £3.4bn Merian UK Mid Cap fund overseen by Richard Watts, the £2.7bn Merian Global Equity Absolute Return fund and Richard Buxton’s £1.7bn Merian UK Alpha fund.
The deal comes less than two years after Merian – formerly known as Old Mutual Global Investors – was spun out of UK wealth manager Quilter in a management buyout supported by private equity firm TA Associates.
In a statement, Jupiter claimed the acquisition of Merian would help diversify its existing revenues with the representation of the top five funds falling from 46 per cent of assets under management to 33 per cent. The number of funds with assets of more than £1bn would also increase from 10 to 16.
The deal – which is planned for completion during the second half of the year – will take place through the issue of almost 100,000 new Jupiter shares and will see Merian shareholders owning – in aggregate – 17 per cent of the enlarged firm, post-completion.
An extra £20m will be payable to key Merian management shareholders on the fourth and fifth anniversaries after completion for growing and retaining revenues in the investment strategies.
Performance of Jupiter share price over 5yrs
Source: FE Analytics
Key Merian management shareholders – responsible for managing approximately 87 per cent of the total Merian assets under management – will own 1 per cent of the enlarged share capital “creating an alignment of interests with other Jupiter shareholders”.
Furthermore, key Merian management will enter into full-time employment contracts with Jupiter containing “comprehensive non-compete and non-solicit obligations”.
“The addition of Merian is compelling for all stakeholders,” said Andrew Formica, chief executive of Jupiter. “With this acquisition, our business will benefit from an increased capacity to attract, develop and retain high quality talent, backed by further investment in our platform and technology.
“In turn, we will be able to offer a wider choice of strongly performing active investment strategies to our clients, while shareholders will benefit from a highly earnings accretive deal delivered through substantial cost synergies.”
Mark Gregory, chief executive of Merian, added: “Jupiter is a great strategic and cultural fit with our business. It has a market-leading brand with a clear focus on high conviction, active asset management which is entirely consistent with our own.
“I believe the enlarged business will be more strongly positioned to offer greater choice and investment performance to clients and continue to meet clients’ ever-evolving needs.”
The acquisition is the latest development in the UK asset management industry in recent months, which has seen Liontrust Asset Management acquire Neptune Investment Management and Premier Asst Management merge with Miton Group.
Darius McDermott (pictured), managing director of Chelsea Financial Services, said the acquisition of Merian was part of a longer-term trend for the UK asset management industry.
“While this particular news may come as a surprise, there has been a growing trend of consolidation amongst asset managers in the UK for the past decade or so,” he said. “Andrew Formica also has experience of these types of acquisitions during his time at Janus Henderson, notably when the firm acquired New Star Asset Management and Gartmore.”
It comes at a time when Jupiter had come under takeover speculation itself and been struck by the departure of star European equities manager Alexander Darwall, who left to set up his own firm Devon Equity Management.
Indeed, announcing its full-year results, Jupiter revealed that it had seen £4.3bn in net outflows from its European growth strategy, although group assets under management remained stable at £42.8bn.
In addition, the asset manager announced that underlying pre-tax profits had fallen by £20m in 2019 to £163m as net management fees dropped by £26m to £370m.
Ryan Hughes, head of active portfolios at AJ Bell, said while surprising given the fact that Merian had only relatively recently been spun out, the move could be seen as a wider reflection on the impact that passive strategies are having on active managers.
“Should this deal go through, it would continue the recent trend of active managers merging to try to 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,” he explained.
Ultimately, investors are unlikely to see too much change, most agree.
“While there is always uncertainty in such events, Jupiter has a strong philosophy to allow fund managers the freedom to express their views, even if they differ from each other, and this should help ease any concerns investors might have,” said Adrian Lowcock (pictured), head of personal investing at Willis Owen.
“Ultimately, Jupiter is unlikely to do anything to disrupt the successful Merian teams, particularly the renowned UK equities offering. Whilst the acquisition strengthens Jupiter’s offering, it also means that Merian fund managers have access to the resources of a larger group, so this looks to be a good pairing.”