Man Group plc ('Man') has agreed to acquire the entire issued share capital of FRM Holdings Limited (Financial Risk Management 'FRM'), a global hedge fund research and investment specialist with funds under management of approximately $8.0 billion.
Man will integrate FRM with its multi-manager business and, through combined resources and scale, will aim to offer clients deeper and more diverse capabilities, increasingly compelling products and services and better investment performance.
No consideration will be paid up front, with contingent consideration dependent on asset retention. The Acquisition will involve a scheme of arrangement under Jersey law and is also subject to the satisfaction or waiver of customary conditions (including receipt of regulatory approvals including from the FSA). It is expected to be completed before the end of Q3 2012.
Upon completion, the combined business will trade under the FRM brand and will be led by Luke Ellis, Chief Executive of Man Multi-Manager and previously Managing Director of FRM. Ellis’s knowledge of both businesses will accelerate integration and ensure continuity for fund investors. Blaine Tomlinson, founder of FRM, will become non-executive Chairman of the combined business.
Cost savings of $45m per annum from operational synergies in the combined group are expected to generate double digit accretion to Man’s adjusted management fee EPS in 2013. The internal rate of return from the Acquisition is expected to be well in excess of Man’s cost of capital.
Peter Clarke, Chief Executive of Man, 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. The transaction has been structured so that the consideration adjusts in line with asset retention, to ensure an attractive return for our shareholders'.
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