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Janus Capital Group Inc. and Henderson Group plc announce recommended merger of equals

Henderson Group plc (“Henderson”) (LSE & ASX: HGG) and Janus Capital Group Inc. (“Janus”) (NYSE: JNS) today announce that their respective Boards of Directors have unanimously agreed to an all-stock merger of equals. The combined company will be named Janus Henderson Global Investors plc.

Highlights

  • Combined group, Janus Henderson Global Investors plc, will be a leading global active asset manager with AUM of more than US$320bn and a combined market capitalisation of approximately US$6bn
  • Janus’ strength in the US markets will be combined with Henderson’s strength in the UK and European markets to create a truly global asset manager with a diverse geographic footprint which closely matches the global fund management industry
  • Consistent cultures and corporate strategies will facilitate integration
  • Attractive growth potential, together with annual run rate net cost synergies of at least US$110m, expected to deliver compelling value creation for shareholders
  • Henderson and Janus CEOs will lead Janus Henderson Global Investors plc together, reflecting the importance of smooth integration in a people-focused business
  • Combined group will apply for admission to trade on the NYSE as its primary listing, retaining Henderson’s existing listing on the ASX
  • Janus’ largest shareholder, Dai-ichi Life (Dai-ichi), has committed to supporting the merger and intends to extend its strategic partnership to the combined group

The merger will be effected via a share exchange with each share of Janus common stock exchanged for 4.7190 newly issued shares in Henderson. Henderson and Janus shareholders are expected to own approximately 57% and 43% respectively of Janus Henderson Global Investors’ shares on closing, based on the current number of shares outstanding. The merger is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.

The combination of these two complementary businesses is expected to create a leading global active asset manager with significant scale, diverse products and investment strategies, and depth and breadth in global distribution. The result will be an organisation that is well-positioned to provide world-class client service, gain market share and further enhance shareholder value.

Andrew Formica, Chief Executive of Henderson, said “Henderson and Janus are well-aligned in terms of strategy, business mix and most importantly a culture of serving our clients by focusing on independent, active asset management. I look forward to working side-by-side with Dick, as we create a company with the scale to serve more clients globally, as well as the strength to meet their future needs and the growing demands of our industry.”

Dick Weil, Chief Executive Officer of Janus, said “This is a transformational combination for both organizations. Janus brings a strong platform in the US and Japanese markets, which is complemented by Henderson’s strength in the UK and European markets. The complementary nature of the two firms will facilitate a smooth integration and create an organization with an expanded client-facing team and product suite, greater financial strength, and enhanced talent, benefiting clients, shareholders and employees.”

Benefits of the Merger

Expanded Client Facing Team

  • Increased distribution strength and coverage in key markets, including the US, Europe, Australia, Japan and the UK, as well as a growing presence in the Asia-Pacific region, the Middle East and Latin America;
  • Janus Henderson Global Investors’ AUM by region on a pro forma basis will be approximately 54% US; EMEA 31% and the Pan Asian region 15%; and
  • Complementary brand attributes strengthen global market position.

Diversified Products and Investment Strategies

Diversified products and investment strategies to better address a broader range of contemporary client needs;

  • Between them, Henderson and Janus have both invested to satisfy future client needs for alternative sources of income and absolute return;
  • Combined organisation will have a broad array of outperforming strategies; and
  • Enhanced global investment footprint, portfolio management experience and depth of research teams each support even better outcomes for clients.

Enhanced Talent

  • Combining the talent from both firms creates a stronger organisation of approximately 2,300 employees, based in 29 locations around the world;
  • Complementary nature of the two businesses and expanded global footprint creates broader platform for professional development; and
  • Cultural compatibility driven by shared client-centric values and minimal overlap of investment strategies and client assets.

Financial Strength

  • Combined balance sheet creates greater financial stability through market cycles and allows Janus Henderson Global Investors to continue to grow and invest in new opportunities;
  • Combined group had revenue of more than US$2.2bn and underlying EBITDA of approximately US$700m (for the year ended 31 December 2015; see Note);
  • Increased economies of scale expected to lead to greater efficiency and improved profitability; and
  • The Board of Janus Henderson Global Investors is expected to continue to operate a progressive dividend policy, growing the dividend broadly in line with underlying earnings growth over the medium term and with a payout ratio consistent with Henderson’s current practice.

Value Creation

  • Targeting annual run rate net cost synergies of at least US$110m weighted to the first 12 months following completion and expected to be fully realised three years post completion, representing approximately 16% of the combined group’s underlying EBITDA (see Note);
  • Synergies expected to drive double digit accretion to both companies’ earnings per share (excluding one-off costs) in the first 12 months following closing; and
  • Ambition to deliver 2-3 percentage points of additional net new money from the combined business post-integration.

Governance and Management

The Board of Directors will comprise equal numbers of Henderson and Janus directors, with Henderson Chairman Richard Gillingwater becoming Chair of the combined Board and Janus’ Glenn Schafer becoming Deputy Chair.

Janus Henderson Global Investors will be managed by a newly appointed Executive Committee, whose members will report jointly to Co-CEOs Dick Weil and Andrew Formica:

  • Janus’ Head of Investments, Enrique Chang, will become Global Chief Investment Officer
  • Henderson’s Global Head of Distribution, Phil Wagstaff, will become Global Head of Distribution
  • Janus’ President Bruce Koepfgen, will become Head of North America
  • Henderson’s Executive Chairman Pan Asia, Rob Adams, will become Head of Asia Pacific
  • Janus’ CFO, Jennifer McPeek, will become Chief Operating and Strategy Officer
  • Henderson’s Chief Financial Officer (CFO), Roger Thompson, will become CFO
  • Janus’ Chief Compliance Officer, David Kowalski, will become Chief Risk Officer
  • Henderson’s General Counsel and Company Secretary, Jacqui Irvine, will become Group General Counsel and Company Secretary

Janus’ subsidiaries, INTECH and Perkins will be unaffected by the merger. INTECH CEO, Adrian Banner, will continue to report to the INTECH Board of Directors and Perkins CEO, Tom Perkins, will continue to report to the Perkins Board of Directors.

Dividends and Share Buyback

Under the terms of the merger, Henderson and Janus have agreed that:

  • Prior to closing and subject to shareholder approval, Henderson shareholders will be entitled to receive a final dividend in the ordinary course for the year ending 31 December 2016. The timing of payment of any such dividend may be accelerated, so that it occurs prior to closing;
  • Prior to closing of the merger and subject to the Janus Board’s approval, Janus shareholders will be entitled to receive quarterly cash dividends in November 2016 and February 2017; and
  • After closing of the merger, Janus Henderson Global Investors’ shareholders will be entitled to receive an interim dividend for the three-month period ending 31 March 2017, in an amount to be determined by the Janus Henderson Global Investors Board.

The £25m share buyback of Henderson shares, scheduled to take place in the second half of 2016, will no longer take place.

Relationship with Dai-ichi

  • Dai-ichi, the largest Janus shareholder, has committed to vote in favour of the merger and believes the combination will further strengthen its global partnership with Janus Henderson Global Investors;
  • Post-merger, Dai-ichi will hold approximately 9% of the combined group and intends to further invest in the combined company to increase its ownership interest to at least 15%;
  • To assist Dai-ichi in achieving its ownership ambitions, the parties have agreed, subject to the completion of the merger, to sell Dai-ichi options to subscribe for up to approximately 5% of new Janus Henderson Global Investors shares; and
  • Dai-ichi anticipates additional investments in the Janus Henderson Global Investors product range, post-closing, of up to US$500m, which would bring its total committed invested assets in Janus Henderson Global Investors to US$2.5bn.

Next Finance , October 4

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