Man Group has entered into a conditional agreement to acquire Numeric Holdings LLC. Numeric is a privately-owned, Boston-based quantitative equity manager with $14.7 billion of funds under management as at 31 May 2014.
Founded in 1989, Numeric has an attractive and established investment track record across a range of long only and long-short, fundamentally based quantitative strategies. Based on annualised returns, over 95% of Numeric’s current strategies have historically outperformed their selected benchmark over 1, 3 and 5 years. 100% of Numeric’s long only strategies covered by eVestment rank in the top quartile of their respective peer groups over 1, 3 and 5 years.
Numeric’s business has seen substantial growth in recent years, with funds under management increasing from $7.6 billion at the end of 2012 to $14.7 billion as at 31 May 2014. Numeric generated EBITDA of $47 million for the year ended 31 December 2013.
Under the terms of the Acquisition, Man will pay $219 million in cash at completion, with up to $275 million of further consideration payable to a broad group of the Numeric management team and employees ("Numeric Management") following the fifth anniversary of completion under an option arrangement, dependent on the run rate profitability of the business. The regulatory capital usage associated with the Acquisition is expected to be approximately $325 million.
The Board of Man believes that the Acquisition provides attractive strategic, commercial and financial benefits to Man and its shareholders through the:
- Creation of a diversified, global quantitative investment platform comprising AHL and Numeric, with over $25 billion of funds under management and a broad product range across alternative and long only, trend following, technical and fundamental strategies;
- Further development of Man’s footprint in North America, through a recognised brand, a presence in an important investment centre and relationships with a range of institutional clients;
- Provision of investment capacity in a number of strategies with an attractive and long investment track record and therefore the potential to add incremental funds under management through combining Numeric’s investment offering with Man’s global distribution capability;
- Addition of a highly experienced and well regarded team with a strong cultural fit;
- Alignment of the interests of Numeric Management with those of Man’s shareholders through having over 90% of the maximum aggregate consideration payable to Numeric Management being dependent on the run rate profitability of the Numeric business at the fifth anniversary of completion; and
- Opportunity to achieve a strong risk-adjusted return on capital; additionally the Acquisition is expected to be earnings accretive from completion.
Commenting on the Acquisition, Manny Roman, Chief Executive Officer of Man, said: “We are delighted to announce the acquisition of Numeric, which has an excellent track record of performance and innovation in quantitative investing. The transaction provides us with the opportunity to advance two of our core strategic objectives: first, to build a diversified quantitative fund management business with significant assets in fundamentally based quantitative strategies and second, to develop further our presence in the US market. Man’s strategy is to provide the optimal infrastructure and environment for its investment divisions, enabling entrepreneurial asset management focused on delivering attractive risk-adjusted performance for clients. Numeric is well positioned to benefit significantly from our scale and resources.”
Mike Even, Chief Executive Officer of Numeric commented that: “Man stood out to us as a perfect strategic partner and today’s announcement signifies the full support of Numeric’s management team. Our key criteria from the outset was to find a new partner with a strong cultural fit who would preserve complete independence of our investment process and provide strategic support. We are excited and energised by this transaction and look forward to serving our clients with the support of Man.”
The Man Board, which has received financial advice from Credit Suisse, considers the terms of the Acquisition to be fair and reasonable. In providing financial advice to the Board, Credit Suisse relied upon the Board's commercial assessment of the Acquisition.
Completion is subject to the satisfaction (or, where permitted, waiver) of certain conditions including the approval of Man's shareholders. A circular setting out further details of the Acquisition and containing a notice convening a general meeting to seek shareholder approval for the Acquisition will be sent to Man’s shareholders. The timing of satisfaction of certain of the other conditions to the Acquisition is uncertain given the involvement of third parties but it is currently expected that the circular will be published in August 2014 and completion is currently expected to occur in September 2014.