Boutique investment group Jupiter Asset Management has announced proposals to buy Merian Global Investors.
Jupiter has confirmed it is in talks to acquire Merian, which was only formed two years ago after a management buyout of Old Mutual Global Investors led by veteran fund manager Richard Buxton. Jupiter is expected to pay £370 million to acquire the firm, which will be funded by issuing new shares, with one-off integration costs of around £45 million. The combined group will have assets under management of £65 billion and the deal is set to complete by the middle of the year.
Jonathan Miller, head of manager research at Morningstar, says the price Jupiter is paying for Merian is surprising, given that the firm was valued at just shy of £600 million in June 2018. Miller says: "It's somewhat of a surprise that after Merian's own change of direction backed by private equity, it's now set to be acquired. Andrew Formica (chief executive of Jupiter) made a number of acquisitions when he was chief executive of Henderson and this is clearly part of his strategy at Jupiter too."
Takeover Target
Jupiter itself had been seen as a potential takeover bid target for other industry rivals, following a year of heavy outflows and the loss of key personnel including fund manager Alexander Darwall, who left the business to set up his own company in April 2019, taking with him the £1 billion Jupiter European Opportunities (JEO) trust mandate.
Ryan Hughes, head of fund selection at AJ Bell, says if the deal goes through it could “take the heat off the business, which has been suffering significant outflows in recent quarters”. He adds: “It would bring significant economies of scale and the potential for the enlarged business to streamline its product range.”
The rate of mergers and acquisitions has been picking up across the fundsindustry. Last year, Liontrust acquired boutique Neptune Investment Management, while Miton and Premier merged to form Premier Miton.
Ben Yearsley, director at Shore Financial Planning, says this latest takeover is quite surprising given how recently Merian was formed. However, he points out that as both houses are UK-focused in their fund ranges there will be lots of opportunity to cut costs. Yearsley adds: “Jupiter was once the darling of the private investor but has struggled in recent years, with no ‘go to’ fund.”
Jupiter has a number of Morningstar Analyst rated funds among its numbers, including the Bronze-Rated Jupiter Distribution and Silver-Rated Jupiter European Special Situations and Jupiter Dynamic Bond funds.
At Merian, the Merian Europe ex UK Smaller Companies fund has a Bronze Morningstar Analyst rating, and the Merian North American Equity is rated Silver, alongside Richard Buxton's Merian UK Alpha fund.
Mark Gregory, chief executive at Merian, says: “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 out 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.”
Andrew Formica, chief executive of Jupiter, says: “This is an exciting acquisition that enhances our positions as a leading UK asset manager, provides increased scale and diversification into attractive product areas and creates stronger future growth prospects for the business."
The announcement came on the same day that Jupiter released a trading update showing pre-tax profit had fallen to £163 million in 2019, from £183 million the previous year. Assets under management at the firm had edged up slightly in the year from £42.7 billion to £42.8 billion after its funds enduring net outflows of £4.5 billion.
