Henderson and Janus Capital agree $6bn merger, cancelling LSE listing

Henderson Group has agreed a $6bn "merger of equals" with New York-listed fund management peer Janus Capital, with a proposal to cancel the FTSE 250 company's London listing.

The combination, which will create a company with more than $320bn assets under management when it completes as expected in the second quarter of 2017, will leave the UK company's shareholders owning 57% of the enlarged group but via a proposed primary listing on NYSE as the LSE listing is cancelled on cost grounds but the existing Henderson ASX listing retained.

Henderson's final dividend this year will be paid but its planned £25m share buyback has been cancelled, while Janus will pay a final and a quarterly payout.

In effect a nil-premium offer, the merger will be effected via a share exchange with each Janus share swapped for 4.7190 newly issued shares in Henderson, with Janus' majority owner Japan's Dai-ichi Life pledging to continue its support

Proposed joint chief executive officers, Henderson’s Andrew Formica and Janus’ Dick Weil with Henderson's Roger Thompson the proposed finance chief, highlighted the strong potential for growth and have already targeted at least $110m of annual cost savings to be taken out over the next three years.

Their ambition is to increase new flows by 2-3 percentage points per year, with Henderson already having a stretching target of 6-8%.

Weil hailed a "transformational combination for both organizations" and highlighted his company's strong platform in the US and Japanese markets that would be complemented by Henderson's strength in the UK and European markets.

Formica added: "Henderson and Janus are well-aligned in terms of strategy, business mix and most importantly a culture of serving our clients by focusing on independent, active asset management.

"I look forward to working side-by-side with Dick, as we create a company with the scale to serve more clients globally, as well as the strength to meet their future needs and the growing demands of our industry."

Rebecca O'Keeffe at broker Interactive Investor said it was a "significant move" for the active fund manager market.

"In the current low interest rate environment, we have already seen investors move towards passive funds in an effort to reduce their overall costs. This move has increased pressure on active managers to provide clear evidence of their value.

"For some, an unconstrained mandate, good stock picking ability and a track record of performance proves that the extra costs are worth it - however, many active funds are less compelling. Active managers are going to have to continue to work hard to convince investors of their relative value, but consolidation in the industry could help."

Shore Capital analyst Paul McGinnis said he saw the deal "as a positive move with complementary asset bases and a very material cost synergy figure".

Investors agreed, with shares in Henderson surging 18% to 274.1p, their highest point since February.