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October 04, 2016 at 11:41 AM
The merger between U.S.-based Janus Capital Group and U.K.-based Henderson Group announced Monday is designed “to create a global asset manager with diverse geographic footprint,” according to the official announcement. But while it is expected to increase the distribution of the firms’ mutual funds, under the new Janus Henderson Global Investors name, it’s not clear the merger will curb the asset outflows of either firm.
Since 2000, Janus has had only two years of net inflows, and outflows this year through August were $1.6 billion—almost as much as the $1.7 billion for all of 2015, according to Morningstar.
Henderson Group had outflows of 2 billion British Pounds in the first half of this year, equivalent to $2.55 billion.
Underlying these outflows is the growing preference by investors for passively managed funds and ETFs over actively managed mutual funds, which is the bread and butter of Janus and Henderson. Investors withdrew $166.2 billion from actively managed U.S. stock funds through August, while they poured $109.9 billion into passively managed U.S. stock funds, according to Morningstar.
“While the deal brings both sides added distribution capabilities in previously untapped global markets, it’s unclear whether that will be enough to curb the asset outflows that have plagued Janus in recent years,” wrote Morningstar analyst Andrew Daniels in a note about the merger.
Morningstar analyst Greg Carlson told ThinkAdvisor that the merger makes sense from a distribution point of view, since the combined firm will have a bigger presence in markets that the two firms individually didn’t have—Janus in Western Europe and Henderson in North America.
Janus CEO Dick Weil, in a statement, called the merger “a transformational combination for both organizations. Janus brings a strong platform in the U.S. and Japanese markets, which is complement6ed by Henderson’s strength in the U.K. and European markets.”
The new firm will be renamed Janus Henderson Global Investors and have more than $320 billion in assets and a market cap of approximately $6 billion, according to the press release announcing the deal. In addition, the deal is expected to save an estimated $110 million in “cost synergies” in its first three years.
The current CEOs of each firm—Weil of Janus and Andrew Formic of Henderson—will lead the new firm together, which will apply to trade on the NYSE under the symbol HGG, Henderson’s current listing on the ASX (Australian Securities Exchange).
Under the merger, Janus shareholders will own approximately 43% of the new firm, while Henderson shareholders will own 57%. It’s expected to close in the second quarter of next year, subject to shareholder and regulatory approvals.
