The investment manager Jupiter is to pay £370m to buy Merian Global Investors in a deal that will create the second-largest retail asset management group in the UK.
The enlarged group will have £65bn under management, but some analysts said they regarded the deal as an essentially defensive merger of two struggling businesses.
Jupiter has been affected by significant outflows in recent months, losing £4.5bn of client funds during 2019 following the departure of a “star” European fund manager, Alex Darwall, who left to set up his own business. The trading update accompanying the news of the deal revealed a slide in Jupiter’s profits to £163m for 2019, compared with £183m the year before.
The market initially welcomed the relatively low price paid for Merian, better known under its pre-2018 name Old Mutual Global Investors (OMGI).
The private equity firm TA Associates backed a £600m buyout of OMGI in December 2017, subsequently renaming it Merian, but it sagged as funds flowed out of the business. At the time of the purchase in 2017, the OMGI/Merian business had £25.7bn in funds under management, but the figure has since fallen to £22bn.
Jonathan Miller of the investment research agency Morningstar said: “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. The deal is symptomatic of the pressure active managers are finding themselves under.
“Merian was valued just shy of £600m in June 2018, but Jupiter is set to pay £370m for the acquisition, with £29m in net debt and Merian shareholders becoming a 17% shareholder of the enlarged entity.”
The acquisition is the latest deal by Andrew Formica, the Australian who led the merger between fund managers Henderson and Janus in 2016 then joined Jupiter as chief executive in early 2019.
Formica promised that shareholders would benefit from substantial cost “synergies” and that the deal will be “highly earnings accretive”. He added: “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.”
As part of the deal, key Merian fund managers will be paid an extra £20m if they reach five-year targets set by the combined group.
Jupiter’s share price peaked at 628p at the end of 2017 but fell by more than half the following year amid fund outflows and poor performance. Since then it has traded in the 300p-400p range. The shares rose 2.5% to 407p on Monday.