For Immediate Release
London and New York, 14 October 2016
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION
MAN GROUP PLC
Man Group acquires Aalto and launches Man Global Private Markets
Man Group plc ("Man Group") today announces that it has entered into an agreement to acquire the entire issued share capital of Aalto Invest Holding AG ("Aalto" or the "Company") (the "Acquisition") and launched Man Global Private Markets ("Man GPM"), forming the firm's private markets offering, which provides clients with access to longer term investments with a complementary risk reward profile to our current product suite.
Aalto is a US and Europe-based real asset focused investment manager with $1.7 billion of funds under management as of 30 September 2016. Aalto will form the real assets platform of Man GPM. Founded in 2010 by Mikko Syrjänen and Petteri Barman, Aalto specialises in the management of real estate equity and debt strategies including direct investments in single family homes in the US and lending to commercial and residential real estate in Europe and the US. Aalto has a strong track record across its differentiated product range, and serves a client base of predominantly large institutional investors.
The Company, which is wholly-owned by its founders and current and former senior staff members, has demonstrated a compelling growth trajectory having grown fourfold over the last four years. Aalto has 33 employees and is headquartered in London, with offices in the US and Switzerland. The Acquisition is expected to complete in January 2017, subject to regulatory approvals and other customary conditions.
The Board of Man Group believe the Acquisition provides attractive strategic, commercial and financial benefits to Man Group and its shareholders. These include:
· Supporting the launch of Man GPM, providing a core component for the long term expansion into private markets strategies;
· Broadening and diversifying Man Group's investment management capabilities giving the firm's clients access to a range of strongly performing, differentiated real assets strategies;
· Further expanding Man Group's presence in the US, through Aalto's US-based investment team and strategies;
· Alignment of Aalto and Man Group's shareholders with 89% of the maximum consideration payable to Aalto's shareholders dependent on performance metrics measured between one and eight years after closing.
Launch of Man GPM
Man believes that building a private markets business over time represents an attractive opportunity for clients and shareholders. Man will have the ability to offer its clients a broader range of investment strategies to complement existing capabilities in public markets. Private market strategies are run in long duration funds, providing a stable source of revenues, while continuing to diversify Man's product offering and offering further options for growth.
Man GPM will over time develop strategies across private markets such as real estate, credit, and infrastructure. On completion of the Acquisition, Aalto will form a central component of Man GPM, providing a core platform upon which the firm can develop this new offering for clients.
The Aalto management team will continue under the leadership of the Company's founders. In addition, Mr Barman and Mr Syrjänen will be appointed Co-Heads of Real Assets within Man GPM, taking on a broader role in the strategic development of Man GPM's offering in real assets. No change will be made to Aalto's investment process as a result of the Acquisition and investment independence will be maintained. Mr Barman and Mr Syrjänen will report to Jonathan Sorrell, President of Man Group, and will join Man Group's Executive Committee.
The Acquisition supports Man Group's continued focus on expanding and diversifying its offering for clients as well as growing operations in the US.
Commenting on the Acquisition Luke Ellis, CEO of Man Group, said:
"We are delighted to announce the acquisition of Aalto, which will be instrumental in the development of Man Global Private Markets, our new private markets capability. In line with our strategy to continue to diversify the firm and our offering for clients, this private markets capability is complementary to our broad offering in liquid strategies. As Co-Heads of Real Assets, Petteri and Mikko will work with Jonathan Sorrell to help to grow this area of the business, which will offer investors exposure to longer duration capital products and benefit from Man Group's world class infrastructure, broad investment expertise and global resources."
Petteri Barman, Co-Founder and CIO of Aalto, said:
"Joining Man Group is a compelling opportunity for us and our investors, as we believe that the firm is the ideal strategic partner for the next phase of Aalto's development. The firm has a history of successfully integrating complementary businesses, while recognising and supporting their individual expertise, investment processes, and culture. We are excited to work with Man Group to further grow and enhance our business while retaining Aalto's core purpose and independent approach to investing."
Mikko Syrjänen, Co-Founder and CEO of Aalto, said:
"We are excited to partner with Man Group, and to combine Aalto's investment expertise and capabilities with the firm's institutional framework and global resources. Since its foundation, Aalto has operated a client-focused business model over multiple market cycles. We are now at the point in our evolution where the additional infrastructure and diverse investment expertise available at Man Group, as part of Man GPM, enhances our business and enables us to create significant value for existing and future clients. We are delighted to be working with an organisation that will enable us to preserve our entrepreneurial culture."
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Under the terms of the Acquisition:
i. Man Group will pay $25 million at completion of the Acquisition, to be settled 2/3 in cash and 1/3 in new Man Group ordinary shares.
ii. In addition:
a. Man Group will pay an earn out payment of up to $27 million, payable following the first anniversary of completion, on a sliding scale dependent on levels of run rate management fees at the time and to be settled 2/3 in cash and 1/3 in Man Group ordinary shares;
b. Man Group will pay three further earn out payments of up to $180 million in aggregate, payable following the fourth, sixth and eighth anniversary of completion, on a sliding scale calculated as 3.6 times the increase in run rate management fee profit before tax at the time; and
c. the maximum aggregate amount payable by Man Group in respect of earn out payments is capped at $207 million.
The cash consideration payable on completion and the first anniversary of completion will be funded from Man Group's existing and future cash resources. Any further payments pursuant to the earn out arrangements on the fourth, sixth and eighth anniversary of completion are expected to be paid in cash, also funded from Man Group's cash resources and available facilities at the relevant time. However, Man Group has retained the right to, at its discretion, issue Man Group ordinary shares at the prevailing market price in order to satisfy some or all of the consideration payable under the earn out arrangements.
The Acquisition will be implemented through the transfer of the entire issued share capital of Aalto to Man Group Holdings Limited, a wholly owned subsidiary of Man Group. The initial consideration payable on completion will be subject to an adjustment in respect of the actual net working capital position of Aalto at completion.
The Acquisition is subject to the satisfaction (or, where permitted, waiver) of a number of conditions, including:
i. receipt of certain regulatory approvals, including the approval of the FCA to the change of control of Aalto UK Limited; and
ii. compliance with the notification and consent requirements of the US Investments Advisers Act of 1940.
Subject to these conditions, Man Group expects the Acquisition to complete in January 2017 after which time the results of Aalto will be fully consolidated into Man Group.
Financial effect of the Acquisition
The transaction is expected to be EPS accretive from 2017 onwards. The total regulatory capital usage associated with the acquisition is expected to be approximately $75 million.
Information on Aalto
Founded in 2010 by Mikko Syrjänen and Petteri Barman, Aalto is a US and Europe-based real asset focused investment manager with $1.7 billion of funds under management as of 30 September 2016, with offices in London (UK), Charlotte (North Carolina) and Pfäffikon SZ (Switzerland).
Aalto manages strategies which invest in real estate equity, which constitutes approximately $0.7 billion of Aalto's aggregate funds under management, with a focus on single family rental homes in the US; and real estate debt, which constitutes approximately $0.9 billion of Aalto's aggregate funds under management, providing commercial real estate debt and construction financing in the US and Europe. Additionally Aalto manages a strategy investing in listed equities with $0.1 billion of assets.
Aalto's 2015 revenues and profit before tax were $10 million and $0 million, respectively and gross assets at 31 December 2015 were $3 million.
Aalto is currently majority owned by Mr Syrjänen and Mr Barman, with the remaining equity being held by Aalto's existing and former senior management and employees.
Information on Aalto Key Individuals
Mikko Syrjänen is the Chief Executive Officer of Aalto and responsible for the real estate debt strategy with a particular focus on loan sourcing, underwriting and portfolio construction. Petteri Barman is the Chief Investment Officer of Aalto and is responsible for oversight of Aalto's overall investment strategy and the real estate equity strategy.
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About Man Group
Man Group is one of the world's largest independent alternative investment managers, and a leader in liquid investment strategies. Across its four investment managers (Man AHL, Man FRM, Man GLG and Man Numeric), Man Group has diverse hedge funds strategies and long only products across equity, credit, managed futures, convertibles, emerging markets and multi-manager solutions. At 30 September 2016, Man Group's funds under management were $80.7 billion.
The original business was founded in 1783. Today, Man Group plc is listed on the London Stock Exchange under the ticker EMG.L and is a constituent of the FTSE 250 Index.
Man Group also supports many awards, charities and initiatives around the world, including sponsorship of the Man Booker literary prizes. Further information can be found at www.man.com.
Aalto is an investment management firm with $1.7bn of assets under management as of 30 September 2016 and with offices in London (UK), Charlotte (North Carolina) and Pfäffikon SZ (Switzerland). Aalto produces alpha to its investors by direct origination of investment opportunities, deep fundamental analysis and hands-on operational approach to managing risk. The Aalto team has extensive experience in commercial and residential real estate lending and real estate direct investments both in Europe and in the US. The team has a strong track record of deploying capital in markets where pricing inefficiencies arise, having invested in European CMBS since 2011, US residential real estate since 2012, European CRE senior loans since 2013 and European/US real estate construction financing since 2015.
Forward looking statements and other important information
This document contains forward-looking statements with respect to the financial condition, results and business of Man Group plc. By their nature, forward-looking statements involve risk and uncertainty and there may be subsequent variations to estimates. Man Group plc's actual future results may differ materially from the results expressed or implied in these forward-looking statements.
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