The world's largest listed hedge fund, Man Group, is to buy rival GLG Partners in a "transformational" merger worth $1.6bn. The cash and shares deal, which had been rumoured in the market for several months, creates a hedge fund with about $63bn (£43bn) in assets under management.
The two companies yesterday announced their intention to aggressively push into the US once the merger completes.
Peter Clarke, the chief executive of Man, said the deal put the company "as the industry leader in liquid, alternative investment strategies". He added: "The fit between the two businesses is excellent; across investment strategies, geography and investor base." Man Group's core AHL fund relies on computer-driven strategies, while GLG relies on their traders' so-called "discretionary" investment.
The two companies are also strong in different regions. Man has a solid business in the Asia-Pacific region and parts of Europe, while GLG is strong in its home market of the UK – although it is listed in the US – and southern Continental Europe.
Man said the acquisition would provide "compelling strategic and commercial benefits" to its investors. Yet, shares in Man plunged to the bottom of the FTSE 100 index yesterday, closing 8.8 per cent lower at 201.9p over fears it could be overpaying.
Mark Williamson, an analyst at KBC Peel Hunt, said: "This is a transformational deal for Man that brings complementary expertise to the group and importantly reduces its dependence upon AHL, which has long been seen as a weakness."
Yet he echoed some shareholder fears, saying the group was paying a high price and "integration will be an issue". Mr Williamson also raised fears that Man would have to work "to win the hearts and minds" of GLG's traders.
Noam Gottesman, the chairman and co-chief executive of GLG, said: "This is a transformational step for GLG. We have known Man for many years and can be certain that our two businesses are highly complementary, both focused on delivering long-term performance but each with differing client bases and uncorrelated investment strategies."
Along with other principals, Pierre Lagrange and Emmanuel Roman, he will receive shares worth £600m for their 45 per cent stake in the group. They will be locked in to holding the shares for three years.
Man has identified annual cost savings of about $50m, a third of which will be met before the end of the next financial year.
Mr Clarke said: "We're investing for growth. There are synergies but we're not doing the deal for that, there are revenue synergies."
The region with huge potential for the companies is outside their core markets. "We believe there is an enormous opportunity in the US and together we will achieve more in the region," Mr Clarke said.
The companies are not worried about the forthcoming legislation from Europe, due to be discussed in Brussels today, but said the new rules would make the "competitive environment quite tough. Some firms will make the decision to stay out of the EU," Mr Clarke said.
The deal is expected to close in September, when GLG will become a wholly owned subsidiary of Man Group.Reuse content