Impax Asset Management

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From Shares Magazine

Sustainable investment specialist Impax Asset Management (IPX:AIM) looks set boost its assets under management (AUM) by 42% after striking a deal to buy US peer Pax World Management.

The companies have been working together for over a decade managing the Pax Global Environmental Markets Fund with $511m in AUM, so there should not be any cultural problems as the firms know each other well.

With a combined AUM of £10.3bn this puts Impax into a different league in this market, hopefully bringing in even more institutional investors to the company.

This would be a decent investment without the additional resources of Pax but with it, the already transatlantic firm (it has an office in New York) is a must buy.

Environmental investments are growing at a great pace, with Impax holding positions in clean energy, waste management and water companies to name a few.

The Paris Climate Accord is another boon for this fast-growing firm. Chief executive Ian Simm plays down the decision by the US to withdraw from the global action plan to limit global warming. He says: ‘[It] has done little to dent investor enthusiasm for investments in companies that provide solutions to environmental challenges’.

Future looks bright

The acquisition of Pax World Management is costing Impax $52.5m plus contingent payments of up to $37.5m in 2021 based on performance.

Two extra strings to the bow that Pax will bring Impax are passive equity and fixed income strategies to complement the UK headquartered firm’s actively managed funds. This has the potential to bring in some decent retail flows to the enlarged entity and help build AUM.

Peel Hunt analyst Stuart Duncan describes the acquisition as ‘strategically important’ and says it will reduce Impax’s reliance on partner BNP Paribas which has been a key driver of growth in recent years. BNP is the company’s largest shareholder with a 24.99% stake.

Duncan says the deal is expected to be ‘significantly earnings enhancing’ although due to needing Impax shareholder approval, any financial contribution from the deal is unlikely to be seen until the financial year ending September 2019.

‘Impax was already going through a period of significant growth, which has continued given the 61% increase in assets since the start of the year. This deal builds on the group’s presence in the environmental asset sector, particularly in the US, which remains a major growth opportunity, while offering attractive financial returns,’ concludes the analyst.
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