Man Group to buy GLG in bid to kick-start growth

Date: Monday, May 17, 2010
Author: Joel Dimmock, Reuters

Deal values GLG at $1.6 billion

Earnings enhancing from 2012

Man shares down nearly 9 pct

LONDON, May 17 (Reuters) - Hedge fund firm Man Group PLC (EMG.L) has agreed to buy rival GLG Partners for $1.6 billion as it seeks to boost its flagging growth while creating a new giant in an industry reshaping after the financial crisis.

Man Group, already the world's largest listed hedge fund manager, said the offer for GLG (GLG.N) -- accompanied by a dividend cut for this year -- will give the combined group assets under management of about $63 billion, still below the level Man alone achieved before the credit crisis.

At 0915 GMT, Man shares were down 8.8 percent to 201.8 pence as some concerns lingered over the price tag.

"It does seem to be a fairly full price," said Sarah Ing of Singer Capital Markets. "When you buy a people business... what you do with it afterwards is what counts."

GLG shareholders will get $4.50 per share under the deal, a premium of about 55 percent compared to GLG's closing price on Friday and the deal is expected to close by end-September.

The deal is structured as a cash offer to GLG stockholders and as a share offer to the Principals at GLG, predominantly including co-CEOs Emmanuel Roman and Noam Gottesman, who recently relocated to New York, as well as star fund manager Pierre Lagrange.

The trio will recoup $500 million in shares from the deal, and have agreed not to sell those shares for at least two years.

Some industry watchers had expected Man to seek a deal with a U.S. firm to bolster its ambitions in the large and lucrative American market. London-based, but New-York-listed, GLG would "facilitate our access in North America," Man Group chief executive Peter Clarke said.

"We both feel we can get a lot further (in the United States)," he said in a conference call. "This is the most significant move in alternative investment that we have seen, and will see for some time."

Keith Baird, an analyst at Oriel Securities, said the deal would help Man break its dependence on AHL, the flagship fund which struggled to match rivals during the market rally.

"It enables Man to diversify away from AHL, which is a strategic priority for them and it is also a very good price for GLG. It does look positive. It brings together Man's global distribution network with a much wider product range." he said.

In a statement, Man said it has identified annual potential cost savings of about $50 million with one third expected in the 2011 financial year and the balance expected in the first half of the following year.

The acquisition of London-based but New-York-listed GLG is expected to be earnings accretive in the financial year ending in 2012, Man said.