Henderson Global Investors has entered into an agreement to acquire the entire issued share capital of Geneva Capital Management. Founded in 1987, Geneva has assets under management of $6.3bn¹ in Mid- and Small-Cap US growth equities.
- An important strategic milestone in the development of Henderson’s North American business
- Geneva will add US equity investment capabilities and extend US institutional client base
- Initial consideration of $130m; deferred consideration linked to revenue retention of up to US$45m; and growth-related earn-out of up to $25m
- Expected to be underlying earnings accretive in the first full year post acquisition.
North American business update
- Henderson’s North American business continues to grow rapidly, doubling its AUM since 20112
- In May 2014, the US Mutual fund range reached $10bn for the first time, with net inflows of $1.4bn in the year to date
- A US based institution awarded a significant new mandate to the Henderson Global Equity team in May 2014
- Having joined in 2013, the US high yield team has achieved 2nd percentile investment performance in its first full year of operation. Investment grade expertise has been added to the team to expand Henderson’s US and global credit platform
- The acquisition of Geneva will enable Henderson to continue to build its North American business.
1 As at 31 May 2014.
2 From $5.9bn as at 31 December 2011 (excluding assets transferred to TIAA Henderson Real Estate as part
of the property related transactions completed on 1 April 2014) to $12.0bn as at 31 May 2014.
3 Five months to 31 May 2014.
Acquisition of Geneva Capital Management
- Accelerates delivery of Henderson’s strategy to grow and globalise its business
- Post acquisition, the North American business will have approximately $18.3bn 4 of AUM, representing nearly 15% of the Group on a pro forma basis
- Geneva’s investment expertise in US growth equities fills an important capability gap for Henderson
- Geneva has a long track record in managing Mid- and Small-Cap growth equities, underpinned by a disciplined and consistent investment process
- The addition of Geneva will double Henderson’s number of US-based investment professionals
- The acquisition will transform Henderson’s North American presence, bringing proven institutional distribution capabilities to complement Henderson’s successful retail franchise
- The acquisition will quadruple Henderson’s US institutional AUM5
- It will create a well-balanced client base, split broadly equally between retail and institutional
- Geneva’s principals have signed long-term employment contracts and have agreed to reinvest at least 30% of net sale proceeds into Geneva products
- There is a strong cultural fit between the two firms and Geneva principals will become valued members of Henderson’s equity and North American management teams
- Over time, the transaction creates opportunities to build new products with US content (e.g. Global Small-Cap and US All-Cap); launch new US equity retail products; and market Henderson capabilities more actively to US institutions.
4 Based on Henderson US AUM as at 31 May 2014 and Geneva AUM as at 31 May 2014.
5 To around $8bn.
Andrew Formica, Chief Executive of Henderson, said: 'Developing our presence in North America is a strategic priority for Henderson. The acquisition of Geneva is a major step towards achieving our growth ambitions as a global asset manager. It will increase our assets under management in the US by over 50%, add investment management expertise in US equities and extend our US institutional client base.
'We look forward to working with the Geneva team, to ensure that all of our clients benefit from our new partnership. Henderson clients will gain access to Geneva’s strong track record in identifying high quality growth companies in US equities, while Geneva clients will continue to benefit from a stable team and an unchanged investment process, now backed by a global pure play asset manager'.
Amy Croen, Co-Founder and Managing Principal of Geneva, said: 'The team at Geneva is excited to join Henderson. With the backing of a strong international partner who is very supportive of our existing investment strategy and platform, we look forward to taking our business to the next stage of its development.
'On behalf of our clients, we will continue to apply the same consistent investment approach and process that have generated strong risk-adjusted returns since our foundation in 1987'.
The consideration is structured in three tranches.
- Up front consideration of $130m
- Deferred consideration of up to $45m, payable over five years after closing if revenue retention targets are met
- Earn-out of up to $25m, payable over five years after closing if Geneva achieves stretch targets in relation to revenue growth.
This consideration will be fully funded from Henderson’s existing cash resources.
Transaction and integration costs are expected to be around $10m, the majority of which will be incurred in 2014.
This transaction is expected to generate single digit underlying EPS accretion in the first full year post close and returns greater than the Group’s cost of capital.
Henderson currently operates under a regulatory capital waiver, which will remain in place until April 2016. Taking into account the effects of this transaction, Henderson expects to meet its capital requirements without recourse to the waiver during 2015.
This transaction is expected to close on 1 October 2014, subject to customary consents.