Pendal Group is set to double its addressable market in the US, with the acquisition of a value-oriented investment manager for $413 million.
Pendal has declared its intentions to buy 100 per cent of Thompson, Siegel and Walmsley LLC (TWC), a firm headquartered in Richmond, Virginia in the US that primarily operates in long-only equity (US and international).
TWC currently has US$23.6 billion ($30.5 billion) in funds under management. Pendal meanwhile closed March with $101.7 billion in FUM, an 18 per cent uptick over the past 12 months.
Pendal chair James Evans said the deal is a “strategic and compelling opportunity to acquire a higher successful complementary business”, expected to facilitate the company’s growth in the US.
“The acquisition will deliver scale and diversification benefits for Pendal across investment capability, asset classes, geographies and distribution channels,” Mr Evans said.
“The board believes that this acquisition will accelerate shareholder returns and strengthen the diversity of earnings.”
Pendal will fund the purchase through a $190 million placement alongside debt and existing capital.
TSW chief executive John Reifsnider has been named as incoming boss of Pendal’s combined US businesses, taking over the role of CEO, Pendal US, from group CEO Nick Good. Mr Reifsnider will also join Pendal’s global executive committee.
Mr Good commented the US firm is a “natural and cultural fit” with his company and that it will expand its business model in the largest equity market in the world.
“TSW is highly complementary to Pendal’s US business, with almost no overlap of investment strategies and clients. This will deliver the opportunity to generate new FUM through the expansion of our addressable market in the US and our ability to distribute both TSW and JOHCM [J O Hambro Capital Management] products through an expanded global distribution network,” Mr Good said.
“Both businesses have solid flow momentum and high performing investment strategies and with this growth profile, I believe we will be well placed to take advantage of more opportunities inherent in the positive US economic outlook and increasingly strong investor sentiment globally.
“Cultural fit is all important in fund management acquisitions, and both parties have put significant effort into considering comparability, investment, client approach and alignment and mutual commitment to growth.”
Pendal also revealed its results for the first half of its 2021 year, the six months leading up to 31 March. The group managed a 64 per cent surge in statutory net profit after tax (NPAT) to $89.9 million from the year before, or an 8 per cent increase in underlying NPAT to $82.6 million.
Fee revenue had played a part, rising by 14 per cent from the previous corresponding period (pcp) to $277 million.
Mr Good commented there had been a “significant uplift in performance fees, higher global equity markets and a discernable turnaround in flows across most channels in the second quarter of FY21”.
“There was a notable improvement in investment performance with 83 per cent of Pendal’s FUM outperforming their benchmarks over the last 12 months, and J O Hambro Capital Management (JOHCM) performance fees were $41.1 million, up from $600,000 in the prior year,” he said.
“With our improving investment performance, increasingly positive investor sentiment and the implementation of our multi-year strategic investment program, we are well placed to take advantage of the growth opportunities we see ahead.”
The board declared shareholders would receive an interim dividend of 15 cents per share, 13 per cent more than they received in the first half of the 2020 year.
Pendal has signalled it will continue to maintain a global focus in the months ahead.
“During the next half, our focus will be on developing our global distribution capabilities by enhancing our licensing arrangements in Europe, establishing a continental European office and boosting our digital marketing and sales to improve efficiencies and outcomes,” Mr Good said.
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Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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