By Simon Jessop
LONDON (Reuters) - Jupiter Fund Management (L:JUP) said on Monday it had agreed to buy Merian Global Investors for an initial 370 million pounds in shares, in a deal that will make it Britain's second-largest retail funds provider.
The deal is the latest in the actively managed fund management sector, where rising regulatory costs and pressure on fees from cost-conscious investors has pushed smaller firms to join forces and share the burden.
Jupiter, long considered a merger target in its own right, said the deal with Merian would accelerate its growth plan, adding scale and diversifying its fund range.
"This is an exciting acquisition that enhances our position as a leading UK asset manager, provides increased scale and diversification into attractive product areas, and creates stronger future growth prospects for the business," Jupiter Chief Executive Andrew Formica said in a statement.
For Merian, it marks a quick return to listed status as part of a larger firm less than two years after it was created through a private equity-backed buyout from Old Mutual under the leadership of stock-picker Richard Buxton.
Since then, the firm has struggled with poor performance and outflows of client cash, prompting the firm to announce a major restructuring in December.
Jupiter will take on around 29 million pounds in Merian debt and will also pay a further 20 million pounds to Merian shareholders if certain targets are hit. After completion, Merian investors will own around 17% of Jupiter.
TA Associates, the private equity firm that helped Merian get off the ground and which was previously invested in Jupiter, will hold a stake of around 16%.
"We look forward to becoming a long-term shareholder and partner with Jupiter once again," said Chris Parkin, Managing Director of TA Associates.
"Our substantial stake in the combined firm underlines our belief that this transaction will deliver significant strategic benefits and returns to shareholders."
In a trading statement alongside news of the deal, Jupiter said its assets under management at the end of 2019 were 42.8 billion pounds, from 42.7 billion pounds a year earlier. Outflows during 2019 were 4.5 billion pounds.