Henderson set to pay £115m for New Star

Banks left with £100m loss on loans to fund manager
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The Independent Online

Henderson unveiled a £115m offer yesterday for John Duffield's troubled retail fund manager New Star, which was in effect put up for saleafter a last-ditch restructuring inDecember.

The Anglo-Australian fund manager Henderson will pay £22m for New Star's ordinary shares, equivalent to just 2 pence per share, plus a further £73m for preference shares being issued as part of a debt restructuring deal agreed by New Star and its lenders in December.

The takeover is contingent, however, on New Star shareholders voting through the restructuring plan next month. New Star had buckled under the weight of £240m of debt it had raised to return cash to shareholders – many of whom were its own employees – at the height of the credit boom.

Under the December agreement, New Star is delisting from the London Stock Exchange, which it floated on in 2005, and giving the banks HBOS, HSBC, Lloyds TSB, National Australia Bank and Royal Bank of Scotland 75 per cent of the company.

The restructuring, by paying down the £240m of debt, was the signal needed by potential buyers who had been put off by New Star's leverage. Suitors also included Aberdeen Asset Management and Schroders.

Henderson will also pay £20m to cover New Star's remaining borrowings, leaving it debt-free. But the deal will still leave New Star's lending banks to stomach a £100m loss on their loans.

Henderson said the takeover would generate one-off integration costsof £31m, but would contribute toearnings from 2010.

A tie-up between New Star and Henderson's UK business would create the country's joint fifth-biggest retail fund manager, with assets under management of £15bn, including £10bn of New Star assets, Henderson said. It is using £47m raised yesterday through a placing at 65p a share to pay for the acquisition.

"New Star shareholders' investment has been obliterated and the best they can take from this is some degree of comfort that New Star was still of value to someone and that it may help the other company to grow," Adrian Lowcock, the senior investment adviser at Bestinvest, said.

The sale also provides Mr Duffield, who founded New Star in 2000 after leaving his previous fund, Jupiter Asset Management, with an honourable route to retirement. He plans to leave New Star after the deal completes.

New Star's shareholders are due to vote on the delisting next month. If they pass it, it will become effective around 10 March, allowing Henderson to post the takeover documents to New Star shareholders shortly thereafter, with an extraordinary general meeting to approve the takeover likely in April.

The investment bank UBS advised New Star and its creditor banks onthe deal.