(Corrects target in second paragraph to 130 million pounds from
* Deal worth an initial $130 mln, could rise to $200 mln
* Initial fee 2 pct of Geneva's $6.3 bln in assets
* Geneva a U.S. small-, midcap-focused equity house
By Simon Jessop
LONDON, June 30 UK fund manager Henderson Global
Investors has agreed the purchase of privately held
Geneva Capital Management for as much as $200 million, its most
important move yet in a strategy to expand in the United States.
The group had said earlier this year it was aiming to double
its assets by 2018 to nearly 130 billion pounds ($221.2 billion)
and set a top target of agreeing a deal in the United States,
where it aimed to fill a big gap in its global presence.
Henderson will pay an initial $130 million for Milwaukee,
Wisconsin-based Geneva, which has assets of $6.3 billion
invested in U.S. small and mid-range companies, although that
figure could rise to $200 million if certain targets are met.
"Developing our presence in North America is a strategic
priority for Henderson," said Chief Executive Andrew Formica.
Its U.S. operations have already almost doubled in size since
2011 and passed $10 billion in assets in May.
"The acquisition of Geneva is a major step towards achieving
our growth ambitions as a global asset manager," Formica said.
"It will increase our assets under management in the U.S. by
over 50 percent, add investment management expertise in U.S.
equities and extend our U.S. institutional client base."
Shares in Henderson, which rose to a peak of 275.4 pence
earlier this year, were up 0.3 percent at 0952 GMT, in line with
the broader FTSE 250 index of mid-range stocks.
The company's quest to grow its U.S. business had previously
involved the hiring of a fixed-income team from another firm and
the purchase of a stake in equity-focused North Pines, so the
Geneva deal would be its biggest move so far.
The acquisition will also quadruple the amount of money
Henderson invests on behalf of institutions such as pension
funds, to leave its U.S. assets split more evenly with retail.
Other global buys included H3 Global Advisors, an
Australia-based commodities fund manager, and a 33 pct stake in
90 West Asset Management, a natural resources equities manager,
also based in Australia.
Phil Dobbin, an analyst at Espirito Santo Investment Bank,
which acts as a market-maker in Henderson stock, said the
initial deal fee for Geneva was 2 percent of assets under
management (AUM) and 14 times post-tax earnings, "which does not
appear to be unreasonable" by comparison with other deals in the
"Strategically the deal makes sense, allowing Henderson to
continue the build of its North American business which
post-deal will represent (around) 15 percent of group AUM,"
Dobbin said in a note to clients.
Prior to the deal, Henderson's U.S. asset split was 83
percent retail, 17 percent institutional. Afterwards the split
will be 58 percent and 42 percent respectively.
Henderson said the deal for Geneva, founded in 1987 and with
a team of 25 including 11 investment professionals, would boost
underlying earnings by a single-digit percent in the first full
year after it was completed.
It would also generate returns above the cost of capital.
Analysts at JPMorgan said in a note to clients they expected
the deal to be 4 percent beneficial to underlying earnings per
share in 2015.
"We believe the deal is a good strategic fit for Henderson
as it fills an important capability gap, materially extends the
U.S. institutional client base and brings new expertise that
should aid the growth of its broader US offering," the JPMorgan
Transaction and integration costs associated with the deal,
which should close in October, are seen around $10 million, most
of which will be incurred in 2014, Henderson said.
($1 = 0.5877 British Pounds)
(Editing by David Holmes)