Jupiter acquires Merian Global Investors for £390m

Jupiter acquires Merian Global Investors for £390m

Updated: UK-based fund house Jupiter Fund Management has acquired Merian Global Investors in a deal worth £390m.

The combined group will have £66.5bn in AuM. 

Jupiter will pay £370m in equity through the issue of 95m new shares, with a deferred sum of £20m subject to Merian meeting specific targets. Once the deal is approved, Merian shareholders will own 17% of Jupiter's enlarged share capital. 

This is an exciting acquisition that enhances our position as a leading UK asset manager, provides increased scale and diversification into attractive product areas, and creates stronger future growth prospects for the business."

Andrew Formica, Jupiter CEO said: "This is an exciting acquisition that enhances our position as a leading UK asset manager, provides increased scale and diversification into attractive product areas, and creates stronger future growth prospects for the business. It is also consistent with our strategic priorities, adding strong investment talent with a similar culture and investment philosophy."

"The addition of Merian is compelling for all stakeholders. 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."

Merian chief executive Mark Gregory 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."

Merian reported £22bn in AuM to the end of 2019. The combined group will have upwards of £66.5bn in AuM.

Boston-based TA Associates acquired Merian in 2018 from South Africa's Old Mutual. Merian was founded by Richard Buxton, who led the buyout from Old Mutual but who subsequently stepped down as CEO in January of last year.

Ryan Hughes, head of active portfolios at AJ Bell, commented over the weekend, before the merger was formally annoucned: "News that Jupiter is in talks to buy Merian will come as a surprise to many given that it was less than two years ago that Richard Buxton led a management buyout of his fund management business from Old Mutual, while Jupiter themselves have been touted as a possible bid target.

"However, the past 18 months have been tough for both businesses with outflows from flagship products that has provided a major hit to revenue with Jupiter losing Alexander Darwall from their European desk with assets following and Merian seeing their Global Equity Absolute Return fund shrink significantly with following weak performance."

Adrian Lowcock, head of personal investing at Willis Owen, an investment platform in the UK said: "Since Andrew Formica took over at Jupiter there has been the possibility they would look to strengthen the business through acquisition, and investors holding Merian funds will be questioning what the deal means. 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.

"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."

Jason Holland, managing director of business development at Tilney, said M&As are increasingly a survival tactic:  "With the mergers of Janus and Henderson and Aberdeen and Standard Life, Jupiter are the latest UK listed fund management to engage in M&A in order to achieve greater scale and diversify capabilities. While at the individual product level, too much sale can sometimes make the task of delivering alpha more challenging, there is little doubt than in an industry where pressure on margins has been growing and which faces a competitive challenge from the fast growing passives segment, scale is seen as an increasingly important ingredient to delivering operational efficiency and profitability."

And Jonathan Miller, director, Manager Research Ratings, UK, at Morningstar, expressed his surprise at the merger: "It is somewhat surprising that after Merian's own change of direction backed by private equity around 18 months ago, they're set to be acquired. 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.

Miller continued: "In terms of investment teams there is little overlap so this is fairly complementary from that point of view. Still, the deal is symptomatic of the pressure active managers are finding themselves under. Merian was valued just shy of £600 million in June 2018, but Jupiter is set to pay £370 million for the acquisition, with £29 million in net debt and Merian shareholders becoming a 17% shareholder of the enlarged entity."

The merger is subject to regulatory and shareholder approval.

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.