Britain’s Henderson has agreed to acquire Janus Capital for $2.61 billion, combining two active money managers that have been facing growing competition from cheaper passive investment funds.
The merged entity, to be called Janus Henderson Global Investors PLC, will have more than $320 billion in assets. Both firms have been losing clients to passively managed funds, which aim to match the returns from an index.
Janus has lost $30 billion from its mutual funds since 2008, according to Morningstar, while Henderson had net outflows of 2 billion pounds ($2.5 billion) from its funds in the first half of the year.
“This is a transformational combination for both organizations,” Janus CEO Dick Weil said in a news release. “Janus brings a strong platform in the U.S. and Japanese markets, which is complemented by Henderson’s strength in the U.K. and European markets.”
Henderson said the deal will help it boost revenue by allowing it to sell its European stock- and fixed-income products in the U.S. The companies expect to generate annualized savings of about $110 million as they seek to counter the threat from passive funds.
“This is one of many transnational deals we’re likely to witness with the relentless rise of passive management,” Amin Rajan, chief executive of fund management consultancy Create Research, told The Financial Times.
“Passives are eating the lunch of active managers,” he added.
Active money managers make their own decisions on buying and selling stocks and bonds, and typically charge more for their services than passive managers, who have been luring investors with better-performing exchange-traded funds E.T.F.s that track a variety of stock and bond indexes.
Under the terms of the deal, each share in Janus, which has a market capitalization of about $2.61 billion, would be exchanged for 4.719 new Henderson shares.
“This deal does not represent a defensive move. Both organizations have great growth potential,” Henderson CEO Andrew Formica told the FT. “But we might have lost ground with big clients if we were not able to show we are a global player.”