Man Group has made a bold move to diversify its business — it’s buying GLG Partners for $1.6bn.
Via Reuters:
MAN GROUP PLC – VALUES THE FULLY DILUTED SHARE CAPITAL OF GLG AT APPROX $1.6 BLN
MAN GROUP PLC ACQUISITION EXPECTED TO BE EARNINGS ACCRETIVE IN THE FINANCIAL YR ENDING IN 2012
The deal is being structured as a cash offer — $4.50 a GLG share, which is a 55 per cent premium to Friday’s closing price on the New York Stock Exchange.
However, the big three at GLG are taking stock.
Around $570m of it:
The GLG principles (being Noam Gottesman, Pierre Lagrange and Emmanuel Roman, together with their related trusts and affiliated entities, and two limited partnerships that hold shares of GLG Common Stock for key individuals who are participants in the GLG equity participation plan), will receive 1.0856 New Man Shares for each of their shares of GLG Common Stock, valuing each such share of GLG Common Stock at USD3.50.(1) In the event that the value of the shares of GLG Common Stock under the Share Exchange at completion of the Acquisition would exceed USD4.25, the number of New Man Shares issued to the GLG Principals will be reduced proportionally to maintain a maximum value of USD4.25 at Closing.
(That’s around 163m new Man Group shares).
And they have agreed to a three-year lock-up and to maintain their investment in GLG funds:
In addition, Noam Gottesman, Pierre Lagrange and Emmanuel Roman have entered into non-compete agreements with Man for a period of 3 years from the Closing Date. Further details in relation to these lock-up agreements and non-compete arrangements will be set out in the circular to be sent to the Man Shareholders in connection with the Acquisition (referred to below). Each of Noam Gottesman, Pierre Lagrange and Emmanuel Roman have also agreed to maintain certain levels of investment in GLG funds for a period of 3 years from the Closing Date.
Other deal highlights; Man is targeting annual cost savings of $50m, it is all dependent on regulatory approval from the FSA and the dividend is being slashed:
In light of the Acquisition, the Man Board has brought forward its decision regarding the level of dividend it intends to recommend for the year ending 31 March 2011. The Man Board intends to recommend a dividend of at least 22 cents per Man Share in total for that year
The Man Board also confirms that it will recommend a final dividend of 24.8 cents per share for the year ended 31 March 2010, giving a total dividend of 44 cents per share for the year as previously announced on 24 March 2010.
Man says the fit between the two businesses is excellent across investment strategies, geography and investor base:
Man’s quantitative and multi-manager expertise complements GLG’s long track record in discretionary investment strategies, and both firms focus on liquid, transparent and dynamic trading. The structure of the transaction allows us to retain vital focus and commitment to performance whilst integrating Man’s leading structuring and distribution capabilities to the advantage of investors and shareholders alike. We have deployed surplus capital in an earnings enhancing transaction to access savings, balance our investment strategies, and created a powerful business from which we can grow organically.
However, one can’t help feeling Man was desperate to broaden its business beyond its key managed futures fund AHL, which has had a patchy record since markets bottomed last year.
GLG is one way to do this, but this deal involves a lot of ‘key man risk’ even if the big three are locked in.
The early price action in Man Group:
Updates to follow.
Related links:
Dividend overboard at Man Group? – FT Alphaville
Man hunt – FT Alphaville
Futures Funds Fall Most Since 1987 as AHL, Henry Miss Shifts – Long Room