City backs Man’s £50m multi-manager vision
SHARES in struggling hedge fund manager Man Group leapt 4.6 per cent yesterday on hopes its acquisition of FRM could lead to a dividend boost.
The stock, which has halved since early March, closed up at 78.8p as analysts backed a low-risk deal for the global hedge fund research and investment firm with $8bn under management.
Man will not pay anything initially but over three years will pay a maximum of $82.8m in cash depending on how much of FRM’s assets it can retain, plus additional payments depending on performance fees earned.
Man and FRM’s combined business, which will trade under the FRM name, will manage around $19bn in total. The division will be run by head of Man multi-manager Luke Ellis, who was previously managing director of FRM.
Jonathan Jackson, head of equities at Killik & Co, said the deal “leaves Man in a stronger position”.
“The acquisition is expected to be double-digit accretive to Man’s adjusted net management fee earnings per share in 2013. Importantly, this is the figure the group pays its dividends from.”
David McCann at Numis said it was a “fairly small, sensible deal” but said Man’s management could do little to change the poor performance of AHL, the flagship computer-driven fund that lost 6.4 per cent last year.
Yesterday Man chief executive Peter Clarke said: “This financially compelling transaction provides us with the opportunity to significantly improve the profitability of our multi-manager business.
“By combining the complementary investor bases of the two businesses and pairing FRM’s well regarded investment process with Man’s managed accounts infrastructure, we can increase revenues with no material change to Man’s current cost base.”
Man, the world’s largest listed hedge fund, expects cost savings of $45m a year. In January the group said it would cut an extra $75m from costs, on top of previously announced savings of $40m.
The deal, which is expected to be completed before the end of September, is unlikely to herald a buying spree for Man.