Janus Henderson Capital, a $320 Billion Asset Manager

Janus Henderson Capital

On October 3, 2016, the two asset managers Henderson Group Plc. and Janus Capital Group Inc. announced that they will combine their assets in a $6bn merger of equals. This all-share transaction will give rise to Janus Henderson Global Investors Inc., a large asset management firm with over $320bn AUM (Assets Under Management).

About Henderson Group

Henderson Group Plc. is an independent global asset manager, specializing in active investments. Founded in 1934 to manage the estates of Alexander Henderson, the first Lord Faringdon, it got listed on the London Stock Exchange for the first time in 1983. In 1998, Henderson was acquired by the Australian financial services company AMP, from which it eventually demerged in 2003. Headquartered in London with 19 offices spread around the world, Henderson’s core areas of investment are European equities, global equities, global fixed income, multi-asset and alternatives. As of June 2016, it manages £95bn assets on behalf of its clients.

About Janus Capital Group

Founded in 1969 in Denver, Colorado, Janus Capital Group Inc. is a global investment firm with about $195bn AUM as of June 2016. The Firm operates through subsidiaries like Janus Capital Management LLC, as well as INTECH, Perkins and Kapstream. Along with its activities focused on fixed income, equities, multi-asset and alternative investment solutions, Janus is also an ETF (Exchange-traded funds) provider. Currently listed on the New York Stock Exchange, Janus has offices located in 12 countries across North America, Europe, Asia and Australia.

Industry Overview

The Asset Management industry has seen drastic transformations in the last decade. The most important trend is the growing popularity of passive, index tracking funds. According to Morningstar, since 2007 passive funds AUM have grown by over 200% to over $3tn, while active funds AUM have grown by 50%. Though globally active funds still manage 83.3% of investor money against 16.7% in passive funds, investors’ preference steadily shifts towards passive funds.

Asset outflow from active funds is caused by both high costs and disappointing returns. Though average active management fees are decreasing, ETFs fees are much lower. Moreover, in 2014, 2015 and 2016ytd, average active fund returns lagged the market, with over 80% of active managers failing to beat their benchmark. Therefore, due to low cost and guaranteed market return, passive funds are becoming more popular among investors.

In the wake of these transformations, active asset managers are seeking to cut costs and benefit from the economies of scale. Therefore, Janus-Henderson deal is widely perceived as a defensive measure, and further consolidation in the industry is expected.

Top five asset managers in the world are BlackRock ($4.7tn), Vanguard Group ($3.4tn), UBS ($2.7tn, including Wealth Management), State Street Global Advisors ($2.3tn) and Fidelity Investments ($2.1tn). With $320bn AUM, Janus Henderson Global Investors is expected to be among top 20 independent asset managers in the world.

Deal Structure

Both Boards of Directors have unanimously agreed to an all-stock merger, where each share of Janus will be exchanged for 4.179 newly issued shares of Henderson. The resulting company will be named Janus Henderson Global Investors plc. The company will be co-led by both CEOs, Dick Weil of Janus Capital and Andrew Formica of Henderson Group. The co-leadership should guarantee smooth integration of the companies.

Though Janus-Henderson deal is referred to as a merger of equals, shareholders of Henderson will control over 57% of the combined company, while shareholders of Janus will hold the remaining 43%. Janus’ largest stakeholder, Dai-Ichi, has committed to vote in favour of the deal, and will own 9% of the resulting company.  Dai-Ichi has also declared that it would like to increase its investment in Janus Henderson to at least 15%.

The deal, expected to close in the second quarter of 2017, is still subject to shareholder and regulatory approvals.


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