Janus CEO departed after rift on sale-sources
NEW YORK (Reuters) - A rift between Janus Capital Group Inc's (JNS.N) chief executive and its board over the sale of the company was behind CEO Gary Black's surprise resignation, sources familiar with the talks said on Wednesday.
The mutual fund company for months had been in negotiations with bidders including Franklin Resources (BEN.N) over a sale, the sources said. But on Tuesday it showed Black the door as it announced it would raise $300 million of capital instead.
The timing of Black's departure raised questions about the company's description of the parting as "mutually agreed" and "very amicable."
The episode also hinted at a possible a wave of consolidation in the asset management industry, which has been under pressure in the wake of the U.S. equities market meltdown last year.
The sources said rival fund management companies Mass Mutual and Franklin Resources were the leading bidders for Janus. An offer from Mass Mutual for about $14 a share fell through, but Franklin Resources was willing to pay about $13.50 a share in an all-share deal, the sources said.
Janus shares, which initially fell after the announcement of Black's departure and the plan to raise capital, rose 2 percent to close at $11.39 after earlier rising as much as 7 percent.
"The board appears to have rejected numerous proposals that would have provided significant economic advantage to shareholders in the interest of fulfilling a long-term strategic plan," said Don Putman, an investment banker close to the company.
Several members of Janus's board declined to comment and referred questions to the company. Janus spokeswoman Shelley Peterson said Black departed because he and the board felt he had "largely achieved his goals."
Janus Chairman Steve Scheid declined to elaborate during a conference call on Tuesday on the circumstances surrounding the departure of Black, who joined the company in January 2006. Scheid, who was CEO of Janus from 2004 to 2006, did not return messages seeking comment.
Janus has appointed Tim Armor, a Janus director and former president of Stein Roe Farnham's mutual fund unit, as interim CEO.
BOARDROOM POLITICS
It was unclear how popular with shareholders the decision to pass up on a potential takeover will be, but Charles Bobrinskoy, the director of research for Ariel Investments, which owns about 12 percent of Janus, said the company still has "a lot of upside," giving it an intrinsic value of $15 a share.
"We think the performance of the core Janus Funds has been excellent," Bobrinskoy said. "Janus has been attracting new inflows into its core equity products and we expect that to continue based on the strong relative performance."
Sources close to the company said Black's resignation took place because of a boardroom split over whether to sell the company or raise capital. Ultimately, a cash deal with Mass Mutual fell through because of financing problems and the board opted against pursuing a stock agreement with Franklin Resources -- setting the stage for the move to raise capital.
Spokesmen for Mass Mutual and Franklin Resources declined to comment.
On Tuesday, the company set plans to sell $150 million of common stock and $150 million of five-year convertible notes and use the proceeds plus cash to buy back up to $400 million of debt.
Scheid told investors on Tuesday that he was "very, very confident" about Janus' ability to stay independent, but will consider alternatives, "if scale is the only way to win."
In response to a question about shareholder lawsuits, Janus spokeswoman Peterson said the company is taking necessary steps to assure that it will "be profitable for our shareholders."
(Additional reporting by Paritosh Bansal; Editing by Phil Berlowitz, Leslie Gevirtz and Steve Orlofsky)
