21 May 2012
Man to acquire FRM
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 (the "Acquisition"). 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.
Transaction highlights
· Man and FRM's combined multi-manager business will have total funds under management of approximately $19 billion, making it the largest independent non-US based fund of hedge funds. The scale of its combined investment resources plus the sophistication and accelerated growth of Man's managed accounts platform will benefit investors in the flagship funds of both entities. With additional scale and resources, the combination has the potential to attract assets and deliver strong returns to investors.
· No consideration will be paid up front. The contingent consideration to be paid over three years comprises i) a maximum of $82.8 million in cash, net of total net assets acquired (subject to post-closing balance sheet adjustments) and dependent on asset retention ii) a 47.5% share of performance fees attributable to FRM's existing funds under management over three years, subject to a cap.
· 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. Luke'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.
· Sumitomo Mitsui Trust Bank Limited (SMTB) which advises a significant portion of FRM's investors, has endorsed the acquisition by agreeing a new ten year Strategic Relationship Agreement with Man. SMTB will also exchange its current shareholding in FRM for a minority holding of preference shares in RBH Holdings (Jersey) Limited, a Man subsidiary.
· Cost savings of $45 million 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.
