(Repeats story to add link to Breakingviews column)
* GLG valued at $1.6 bln
* Earnings enhancing from 2012, Man may halve 2011 div
* GLG bosses get $500 mln in shares
* Shares down 7.9 pct on valuation fears
(Adds quotes from directors, analysts, background)
By Joel Dimmock and Laurence Fletcher
LONDON, May 17 Hedge fund firm Man Group PLC
(EMG.L) has agreed to buy rival GLG Partners GLG.N for $1.6
billion as it seeks to boost flagging growth, while creating a
new giant in an industry reshaping after the financial crisis.
The cash-and-shares deal creates the world's second-biggest
hedge fund firm behind JP Morgan, based on Institutional
Investor magazine's rankings, and dilutes Man's reliance on its
flagship black box fund AHL which badly lagged rivals last
It also offers Man new impetus in the large and lucrative
U.S. market and gives it access to the super-rich clients and
sovereign wealth funds invested with GLG.
The acquisition is a landmark deal for Man Group Chief
Executive Peter Clarke, the former finance director who took
over from high-profile boss Stanley Fink three years ago,
shortly before the onset of the credit crisis. While removing a
major competitor, the deal boosts total assets to about $63
billion, although this is still below Man's pre-crisis levels.
"This is the most significant move in alternative
investment that we have seen, and will see for some time,"
Clarke told reporters.
Shares in Man Group fell as traders fretted about the price
in a sector where M&A can be tough to pull off -- particularly
with clients left skittish by events of the last two years.
At 1333 GMT, Man shares were down 7.9 percent at 204 pence,
while the FTSE 100 .FTSE was up 0.9 percent.
According to KBC Peel Hunt, Man is paying 19.8 times
earnings for GLG. Man itself is on a p/e ratio of 12.7 times.
"It does seem to be a fairly full price," said Sarah Ing of
Singer Capital Markets. "When you buy a people business... what
you do with it afterwards is what counts."
GLG shareholders will get $4.50 per share and the lion's
share of the premium attached to the offer. The price
a premium of about 55 percent to GLG's closing price on Friday.
Man also announced it would halve its estimated dividend to
22 cents for the current financial year ending March 31 2011,
although a Man spokesman said it may end up higher.
Reuters Breakingviews columns on [ID:nLDE64G0PB],
[ID:nN17102988]; Factbox on [ID:nLDE64G1RN]
For GLG, which will remain in its Mayfair offices after the
deal is completed in September, the deal provides access to
Man's huge sales network and greater stability after a
credit crisis in which assets fell sharply.
"Bigger is better for us," Pierre Lagrange, the long-haired
Belgian star fund manager who founded GLG with Noam Gottesman
1995, told Reuters. With co-CEO Emmanuel Roman, the trio will
get $500 million in shares from the deal, which they have
not to sell for at least two years.
In 2007, they used a U.S. shell company to engineer a
listing on Wall Street which valued the firm at $3.4 billion,
according to Thomson Reuters data.
Man Group has been hit by poor performance of AHL, the
computer-driven $21.1 billion fund named after 1980s founders
Michael Adam, David Harding and Martin Lueck.
The trend-following fund's losses wiped out $1.2 billion
from Man's assets during the fourth quarter of last year and
is still down 3.7 percent over the past year.
Clarke said AHL's underperformance had "not one jot" of
influence over the decision to pursue a deal with GLG. "Our
investors are asking for a broader product offering."
Keith Baird, an analyst at Oriel Securities, said the deal
brought a much-needed shake-up to the product mix.
"It enables Man to diversify away from AHL, which is a
strategic priority for them... It brings together Man's global
distribution network with a much wider product range," he said.
Man has flagged a possible acquisition for some time, and
industry watchers mooted a deal with a U.S. firm to boost Man's
ambitions there. Clarke said London-based, but New-York-listed,
GLG would still "facilitate our access in North America."
GLG's Gottesman moved to New York last year as the firm
sought to shift its focus towards giant U.S. institutional
Man sees annual cost savings of $50 million and expects the
deal to be earnings enhancing in the financial year ending
(Additional reporting by Cecilia Valente; Editing by Erica
(For the Funds Hub blog: blogs.reuters.com/fundshub)
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