Shares in Jupiter Fund Management (JUP) climbed 7.2% to 425p after it announced that it had reached a deal to buy smaller rival Merian Global Investors for £390m in shares and cash.

The acquisition brings Jupiter another £22.4bn of actively-managed assets taking its total assets under administration to more than £65bn.

Jupiter’s management said the deal ‘reinforces Jupiter's core UK franchise and extends capabilities into attractive product gaps.’

INCREASED SCALE

The deal creates the second-largest manager of retail funds in the UK with approximately £40 billion of assets. Moreover it adds to Jupiter’s capabilities in UK stocks, bringing additional expertise in all-cap growth and small-and-mid-cap strategies, and complements Jupiter’s strong value offering.

Like Jupiter, Merian takes an active approach ‘with no imposed house view, providing fund managers with the freedom to make investment decisions.’ It has a reasonable track record too with over half of its funds outperforming the sector average over three years and more than a third outperforming over 10 years.

Jupiter will issue 95.34m new shares to Merian shareholders to finance the deal initially, with a further £20m ‘earn-out’ payable to key management shareholders ‘subject to growing and retaining revenues in their investment strategies.’

Following the deal, which is expected to complete in the second half of the year, Merian shareholders will own roughly 17% of Jupiter’s capital while key management shareholders – who are tied in through contracts which prevent them working for a competitor – will own another 1% of the capital.

Given the continued drift towards passive management, the relentless squeeze on management fees and the increasing regulatory burden, it’s likely we will see more deals in the UK asset management sector as sub-scale firms huddle together in order to build scale and secure their future.

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Issue Date: 17 Feb 2020