ETF Issuer Janus Bought By Henderson Group

Janus has eight ETFs and bought VelocityShares in 2014.

London/San Francisco  London-based asset manager Henderson Group agreed to buy U.S. rival and ETF provider Janus Capital Group on Monday in an all-share $6 billion deal to cut costs and boost profits amid growing competition from index funds run by top providers such as Vanguard Group.

The combined company, Janus Henderson Global Investors, will manage $320 billion in assets, potentially making it the 39th-largest asset manager globally. Henderson Chief Executive Andrew Formica and Janus CEO Dick Weil will be co-chiefs of the London-headquartered company.

If Formica and Weil can tame an operation that will span Denver, London and Japan, their new heft could help thwart expanding regulatory scrutiny on the industry and a move toward low-cost passive investing, analysts said.

Shares of both companies surged as they said the deal would boost earnings by more than 10%, showing that investors saw the move as a viable alternative to other strategies to defend against passive rivals, such as hiring star managers.

"We see this as a positive move with complementary asset bases and a very material cost synergy figure," analyst Paul McGinnis at Shore Capital said in a client note.

Merger Speculation

Analysts expect the deal to kick off talk of mergers elsewhere in the industry.

The merger comes as some midsize players in the industry look to gain global scale, streamline operations and diversify to protect profits as clients push fees down and regulators ramp up scrutiny of fund managers' practices.

"The combined product lineup will be much more balanced and diverse," Formica told a media call, adding Henderson had strength in British and European markets, while Janus, which hired Pacific Investment Management Co co-founder Bill Gross as fund manager in 2014, was strong in the United States and Japan.

In a statement on Monday, Gross touted the "greater global scale" of the combined firms.

Janus, which drew acclaim for its U.S. stock funds during the 1990s tech boom, stumbled in the years after. Weil joined in 2010, and despite moves including hiring Gross and buying exchange-traded funds business VelocityShares in 2014.