Federated Investors, listed on the New York Stock Exchange, is spending £246m to buy a 60% stake in Hermes Fund Managers Limited, which operates Hermes Investment Management.
The stake is being acquired from the BT Pension Scheme, which will retain 29.5% of Hermes and will continue to invest in investment strategies offered by the manager. Hermes management will own 10.5% of the business.
Subject to regulatory approval, the deal should complete in the second half of 2018. Hermes headquarters will remain in London as a subsidiary of Federated Investors. Hermes will also retain its own board, which will include representatives from Federated, the Pension Scheme and Hermes executives, as well as two independent non-executive directors, and be chaired by an independent non-executive chairman.
The deal also includes put/call provisions, which enable Federated to buy and the Pension Scheme to sell additional shares over the next three to six years.
By assets, Hermes manages some £33bn, but also advises on an additional £336.1bn through its Hermes Equity Ownership Services (EOS) division.
J. Christopher Donahue, president and chief executive officer of Federated Investors, said the deal would bring complementary skills together.
Hermes offers some 16 strategies in high active share equities, credit and private markets including real estate, infrastructure and private equity. Federated’s existing strategies are in equity, fixed income and cash management, Donahue noted, adding: “Hermes’ capabilities and client relationships in the UK, the rest of Europe and the Asia-Pacific region significantly broaden Federated’s distribution capabilities.”
Hermes, which spun out as an asset management business from the work managing retirement savings of one of the UK’s biggest and oldest company pension schemes on behalf of BT (which itself once belonged to the General Post Office, itself founded in 1660) was established some 35 years ago. Saker Nusseibeh, chief executive of Hermes Investment Management Limited, said: “The same Hermes investment and stewardship teams will remain dedicated to our investment philosophies in London, while our products and services gain greater exposure through the network of 8,500 financial intermediaries and institutions that already do business with Federated.”
Combined, the new organisation will have some $442.2bn (€358.7bn) in assets under management.
A conference call regarding the proposed acquisition can be found online at: http://www.federatedinvestors.com/FII/about/aboutFederated.do