Shares in Janus Capital Group Inc (NYSE:JNS) spiked higher on Monday by 12.06% to $15.70 on news that the investment manager had agreed to be acquired by the UK based Henderson Group.
Investors may recall that bond guru Bill Gross found a home in Janus after his break-up with Pimco in 2014. The merged entity will oversee funds of approximately $320 billion, and the deal is seen as a reflection of the difficulties faced by the active fund managers in coping with the competition from index funds.
According to Morningstar, over the last three years, passively managed funds in the U.S. have pulled in net flows of nearly $1.3 trillion while active-managed funds lost $326 billion.
The shift in favor of such passive investing has resulted in lower incomes for fund managers such as Janus and Henderson. The merger will result in lower costs, a better global presence and scale of operations, and more efficient tax planning that comes from shifting to a lower tax locale such as the UK.
The merged Janus-Henderson entity will account for its taxes in that country.
Janus Capital Group Inc (NYSE:JNS) is bought out in $6 billion deal
The all share transaction will be worth $6 billion and is expected to boost earnings by over 10%. The merged entity will be known as Janus Henderson Global Investors. It will be owned 57: 43 by Henderson and Janus shareholders respectively. The deal will likely be consummated by the second quarter of 2017.
Andrew Formica, the chief of Henderson, will serve as co-CEO with Janus’ Dick Weil.
The combined company will apply for a listing in New York.
Janus Capital Group Inc (NYSE:JNS) deal with Henderson may be the precursor to more such transactions
“The trend of M&A in this industry is going to increase as firms look to stay relevant in an increasingly challenging market to operate vs passive products and increased regulatory scrutiny,” said Daniel Fannon, an analyst at Jefferies, and quoted by the WSJ.