* Henderson shareholders to own 57 pct of firm
* Firm to delist in London, but to be headquartered there
* Henderson shares up 16.7 pct; Janus shares up 12.4
(Adds quotes, industry context, updates share prices)
By Carolyn Cohn and Trevor Hunnicutt
LONDON/SAN FRANCISCO, Oct 3 London-based asset
manager Henderson Group agreed to buy U.S. rival Janus
Capital Group Inc on Monday in an all-share $6 billion
deal to cut costs and boost profits amid growing competition
from index funds run by top providers such as Vanguard Group.
The combined company, Janus Henderson Global Investors, will
manage $320 billion in assets, potentially making it the 39th
largest asset manager, globally. Henderson Chief Executive
Andrew Formica and Janus CEO Dick Weil will be co-chiefs of the
If Formica and Weil can tame an operation that will span
Denver, London and Japan, their new heft could help thwart
expanding regulatory scrutiny on the industry and a move toward
low-cost passive investing, analysts said.
Shares of both companies surged as they said the deal would
boost earnings by more than 10 percent, showing that investors
saw the move as a viable alternative to other strategies to
defend against passive rivals, such as hiring star managers.
While the merger appeased markets, the combined company will
also need to keep major clients and top employees, such as
portfolio managers, happy, said T. Neil Bathon, managing partner
at asset management consultancy FUSE Research Network LLC.
Henderson shares closed 17 percent higher, while Janus
shares were last up 13 percent on the New York Stock Exchange.
"We see this as a positive move with complementary asset
bases and a very material cost synergy figure," analyst Paul
McGinnis at Shore Capital said in a client note.
Analysts expect the deal to kick off talk of mergers
elsewhere in the industry with companies such as London-based
Jupiter seen as possible targets. Jupiter, whose shares
rose 6 percent, did not respond to a request for comment.
The merger comes as some mid-sized players in the industry
look to gain global scale, streamline operations and diversify
in order to protect profits as clients push fees down and
regulators ramp up scrutiny of fund managers'
Steven Miyao, a president at consultancy DST kasina, said
that with half of the top 100 asset managers seeing withdrawals
since 2014, the strategic value of a merger today is higher than
it will be in the future.
"The combined product line-up will be much more balanced and
diverse," Formica told a media call, adding Henderson had
strength in British and European markets while Janus, which
hired Pacific Investment Management Co co-founder Bill Gross as
fund manager in 2014, was strong in the United States and Japan.
In a statement on Monday, Gross touted the "greater global
scale" of the combined firms.
Janus, which drew acclaim for its U.S. stock funds during
the 1990s tech boom, stumbled in the years after. Weil joined in
2010 and despite moves including hiring Gross and buying
exchange-traded funds business VelocityShares in 2014, investors
pulled $2.2 billion from their funds this year, through August.
Henderson posted withdrawals of $1.6 billion over the same
timeframe, according to researcher Morningstar Inc.
Henderson and Janus shareholders are expected to own
approximately 57 percent and 43 percent, respectively, of Janus
Henderson Global Investors' shares, with the merger completing
in the second quarter of 2017, subject to regulatory approvals.
The merger will involve a share exchange in which each Janus
share will be exchanged for 4.719 newly issued shares in
Henderson, the firms said in a statement.
Analysts said the success of the leadership will depend on
Formica and Weil working well together.
"It can be a disaster if it's the wrong people, if they
don't communicate," said Miyao.
The firms said they were targeting annual cost savings of at
least $110 million, which Henderson chief financial officer
Roger Thompson told the media call represented around 10 percent
of the combined group's cost base. Cost savings would focus on
overlapping functions and areas such as offices and IT, Thompson
Janus' largest shareholder, Dai-ichi Life, supports
the deal, the firms said.
The combined company will apply for a primary listing in New
York, keeping Henderson's Australian listing but delisting in
Talks on the merger began at the beginning of the year and
were not impacted by the Brexit vote, Formica said.
(Additional reporting by Jennifer Ablan in New York and Simon
Jessop in London; Editing by Rachel Armstrong, Simon Jessop and