Shares of Janus Capital Group Inc. (JNS) are rising by about 12% as of 11 a.m. EDT Monday as the company announced it will merge into Henderson Group (LSE: HGG) in an all-stock deal.
The terms of the merger agreement call for Henderson Group to issue 4.7190 shares of the company for every Janus Capital Group share outstanding. Janus Capital Group shareholders will then own about 43% of the newly combined entity, which will be renamed Janus Henderson Global Investors.
The offer roughly values Janus Capital Group at about $16.48 per share, based on a recent quote for Henderson Group shares on the London Stock Exchange, and exchange rates between the British Pound and U.S. Dollar.
Shares of Janus Capital Group and Henderson Group are both trading higher on Monday. In a presentation explaining the deal, cost synergies totaling $110 million per year were indicated as a key source of value creation.
It believes that it can fully reach the targeted $110 million in cost savings three years after the deal is complete, and that it will incur about $165 million to $185 million of "implementation costs" associated with the cost cuts in the 12 months following the merger.
Asset management firms are increasingly trying to compete in an age when fees are under pressure. Slashing costs by linking up with a similarly sized manager may enable the company to preserve and grow assets under management by passing on lower expenses to clients where appropriate, in a bid to avoid the devastating decline in market share for managers of actively managed funds.