Man Group plc ("Man") has agreed to sell its c.25% interest in BlueCrest to BlueCrest for $633m. Man’s investment in BlueCrest dates from 2003, and will generate a pre-tax profit on disposal of around $250 million.
The proceeds of the transaction will add over $500m to Man’s regulatory capital surplus, previously reported to be around $300 million on 31 December 2010.
Peter Clarke, Chief Executive of Man, said:
'The sale of our minority interest in BlueCrest is part of our strategic focus on Man's internal investment management capabilities.
'We have had a long and successful relationship with BlueCrest and this transaction crystallises a significant profit for shareholders on our original investment. It also generates substantial cash and regulatory capital resources, further enhances our strong financial position and allows us to continue developing our core investment business, attracting assets and building on our leading global franchise'.
The consideration includes the settlement of Man’s partnership account in BlueCrest and the redemption of existing loan notes issued by BlueCrest to Man in 2007 (the “Existing Loan Notes”). The disposal is unconditional and is expected to complete shortly.
The consideration paid to Man will comprise $496m of cash, new loan notes issued by BlueCrest ("New Loan Notes") at a par value of $100m and the redemption in cash at par of the $37m of Existing Loan Notes. The New Loan Notes, which will carry a 6.5% cash coupon, are repayable in 2016, although BlueCrest has the right to repay the New Loan Notes before this date. In certain circumstances, the maturity of the New Loan Notes can be extended by BlueCrest, in which case the coupon may increase, but the final maturity will not be later than April 2019. Man expects that the New Loan Notes will be held to maturity as they are only transferable in limited circumstances.
In the 2010 audited accounts, Man carried its investment in BlueCrest at $321m, comprising partnership interests, Existing Loan Notes and an associated foreign exchange reserve.
In the financial year ended 31 March 2010, Man recognised a contribution to profit from BlueCrest of $34m of net performance fee income and $39m of net management and other fee income. The BlueCrest contribution in the first half of the current financial year was $28m. In the second half of the current financial year, Man’s associate income from BlueCrest will be $38m, which is part of the $633m consideration received.