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Henderson has finally moved for Gartmore with a £335m deal and now the industry will wait to see how the firm takes on the big players. By Chris Salih
Advisers have welcomed Henderson’s announcement last week that it intends to acquire the entire stock capital of Gartmore for £335m.
Based on the closing price of 138.2p per Henderson share on the last business day prior to the announcement, January 11, the acquisition values each Gartmore share at 92.1p.
Gartmore shareholders will hold about 22.5 per cent of the enlarged share capital of Henderson imm-ediately following completion of the acquisition.
The deal, which is subject to regulatory and shareholder approval, will see Henderson’s assets under management climb to over £78bn. Overnight, Henderson will go from having the 14th-highest retail assets under management in the UK to sixth.
The deal is the second major acquisition by Henderson in the past few years following the highprofile purchase of New Star Asset Management in 2009.
Henderson decided to keep the New Star brand name for some time due to the strength of its brand in the UK retail area but the Gartmore name will be scrapped once the Oeic range is integrated on to the Henderson platform.
Henderson director of UK retail Simon Hillen-brand says the deal is likely to complete at a much faster pace than the New Star acquisition. Both groups are on the same operating platform, meaning there are no migration concerns. Hillenbrand anticipates that fund mergers will start in the summer.
He says: “We hope the combined business puts us in a position to compete with the leading managers in the retail space as we will have a huge fund offering that can compete in every market.”
Gartmore shareholders may breathe a sigh of relief on the back of the news as 2010 was nothing short of a nightmare for the company.
The firm suspended key fund manager Guillaume Rambourg in March and conducted an internal investigation into alleged breaches of company policy. He returned soon after, only to resign in July following a subsequent FSA investigation which he is devoting his time to.
Flagship European fund manager Roger Guy resigned in November, as did chief investment officer Dominic Rossi, which immediately saw Gartmore launch a strat-egic review of its business.
Gartmore’s share price had more than halved from the 220p IPO price in December 2009 to 92.1p on January 11.
Hargreaves Lansdown senior analyst Meera Patel says the deal to buy the entire stock should be seen as positive for investors in Gartmore funds.
She says: “There was so much uncertainty at Gartmore so this can be nothing but good news for the investors. We saw how low a share price can fall with New Star before that acquisition. However, it is important to recognise that this is far from the finished article as although Henderson has appointed a raft of leading managers from Gartmore, they have not detailed their roles in the business.”
Henderson has agreed lock-in terms with some Gartmore managers following the proposed take-over, including Charles Awdry, John Bennett, Chris Burvill, Tony Lanning, Adam McConkey, Luke Newman, Chris Palmer and Ben Wallace.
Henderson says the managers it is retaining represent 84 per cent of Gartmore’s assets under management.
Gartmore had £4.8bn of redemptions in the final quarter of 2010 following news of Guy’s departure.
Of the £4.8bn of out-flows, £3.1bn was linked to Guy’s former European large-cap team. At January 7, Henderson estimates Gartmore had £16.5bn of assets under management.
Chelsea Financial Services managing director Darius McDermott says the takeover will provide unitholders with more clarity.
He says: “We are comfortable with Hend-erson as a recognised UK retail investment house. The successful integration of troubled asset manager New Star by Henderson last year further strengthens their case.
“The fact that 84 per cent of Gartmore’s fund managers have already signed up to join Hend-erson is very positive. China opportunities, managed by Charlie Awdry, and Gartmore UK absolute return, run by Ben Wallace, which feature on our buy list, will retain their buy ratings. We would urge unitholders of these funds not to push the panic button.”
According to figures from TrustNet, Henderson and Gartmore have a total of 90 funds between them, meaning mass fund mergers may well be the order of the day.
Bestinvest senior investment adviser Adrian Lowcock says investors should wait and see what happens in terms of fund mergers and where mana-gers will positioned within the new firm.
He says: “There has to be consolidation and the fund managers and the mandates of funds could change on the back of mergers. Until that is done and things settle down, I would not take any action. It took a year with the New Star deal although I think it will be slightly quicker here.
“What it does for Henderson is put it firmly in the big league in terms of retail assets. The company now has a good reputation and it will be interesting to see how it pushes on as one of the big players in the retail market.”
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