Barclays reiterates 'equal weight' on Henderson Group after Janus merger news

Barclays reiterated an ‘equal weight’ rating on Henderson Group but raised its target price to 270p from 215p on Wednesday after the investment firm agreed to buy US rival Janus Capital.

The merger will create a combined portfolio of assets under management worth £320bn and the two firms will be renamed Janus Henderson Global Investments. The companies hope to cut costs of $110m per year within three years of closing from areas including IT and office space.

“We believe investors were particularly excited about management’s projection of double-digit accretion as well as the possible future benefits from lower group tax and incremental flows,” Barclays said.

“However, we believe the $110m cost synergies (16% of EBITDA or 7% of costs) are likely to come under more scrutiny given the complementary geography and products of the group.”

Barclays said it believes management need to provide more detail around the $110m of cost savings to convince the market since much emphasis was placed on complementary investment capabilities and distribution strength.

“This is particularly true given that management specified the majority of the benefit would be realised inside 12 months but did not make it so obvious where back office or investment teams are to be rationalised.”

Barclays has raised its earnings per share forecast on Henderson for fiscal years 2016 and 2017 by 4% to 15.2p and 7% to 16.7p respectively.

Shares fell 1.30% to 257.80p at 0929 BST.