Federated Investors Acquires Stake In Hermes
• Hermes manages $44.6 billion (£33.0 billion) emphasizing active investment strategies and stewardship
• BTPS remains substantial minority shareholder and client
• Hermes’ people, processes, organizational structures and locations to remain in place
CEO Saker Nusseibeh: We have created a unique & new kind of asset management business. This new relationship with Federated is the next chapter in our story, giving us the opportunity to accelerate our growth & invest further in the business https://t.co/XFbTmJ3Qp0 pic.twitter.com/FqBkfZ6LHd
— Hermes Investment (@Hermesinvest) April 13, 2018
Federated Investors, one of the largest investment managers in the United States, today announced an agreement to acquire a majority interest in Hermes Fund Managers Limited, which operates Hermes Investment Management, a pioneer of ESG investment processes, from BT Pension Scheme (BTPS).
Upon closing, Federated will pay £246 million (approximately $350 million) to BTPS for a 60 percent interest in Hermes. Federated will fund the transaction through a combination of cash and an existing revolving credit facility. BTPS will retain a 29.5 percent share in Hermes and will continue to invest in Hermes’ strategies as a client. Certain members of Hermes’ management will hold an aggregate 10.5 percent interest in Hermes.
Federated will hold a conference call to discuss the acquisition of Hermes at 9 a.m. Eastern on April 13, 2018.
The agreement has been approved by the boards of Federated and BTPS and is subject to approval of regulatory authorities in the U.K., Singapore and other jurisdictions. The transaction also is subject to satisfaction of other agreed-upon conditions, and is expected to be completed during the second half of 2018. Hermes’ headquarters will remain in London, operating as a subsidiary of Federated Investors, Inc. Upon completion of the transaction, Hermes will retain its own board, chaired by an independent non-executive chairman, comprising representatives from Federated, BTPS and Hermes’ executive leadership, as well as two further independent non-executive directors.
After completion of the transaction, Federated will have the opportunity to purchase and BTPS will have the option to sell additional shares of Hermes from BTPS over the next three to six years pursuant to certain put/call provisions.
Hermes provides 16 differentiated strategies in high-active share equities, credit and private markets, including real estate, infrastructure and private equity, serving more than 550 clients through wholesale and institutional markets. Hermes also advises $453.7 billion (£336.1 billion) through its Hermes Equity Ownership Services (EOS) division.
“The agreement with BTPS brings to Federated great people, a growing global client base, a history of strong performance and one of the world’s leading active ESG investment and engagement businesses,” said J. Christopher Donahue, president and chief executive officer of Federated Investors. “This is a growth opportunity for both Federated and Hermes, with Hermes’ range of investment strategies serving as effective complements to Federated’s existing strategies in equity, fixed income and cash management. In addition, Hermes’ capabilities and client relationships in the U.K., the rest of Europe and the Asia-Pacific region significantly broaden Federated’s distribution capabilities.”
“We are pleased BTPS and Hermes chose to work with Federated, and we are excited about the prospects this agreement brings to all of our businesses,” said Gordon J. Ceresino, president and chief executive officer of Federated Investors (UK) LLP. “As the investment management landscape evolves, we will work together to evaluate business opportunities and develop new strategies for our clients.”
“The power of stewardship, delivered through active engagement with companies, has been an intrinsic belief since Hermes was established 35 years ago,” said Saker Nusseibeh, chief executive of Hermes Investment Management Limited. “Through this opportunity, 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.”
Paul Spencer, chair of the BTPS Trustee, said, “Hermes has delivered excellent investment performance and stewardship to the Scheme over many years, operating initially as our in-house manager and in recent years, building on this capability to develop a strong multi-client business. This transaction is the next step in the evolution of Hermes, as it continues to expand its global business. In Federated, we have identified a firm with shared values and beliefs that will both help grow Hermes and ensure the continued focus on delivering excellent investment performance and stewardship for the Scheme, in the interests of our members. We look forward to working with Hermes and Federated in the years ahead and wish the business well as it embarks on this next exciting chapter.”
The combined organization would have approximately $442.2 billion (£327.6 billion) in assets under management.
In the agreement, Federated’s lead financial advisor was Citigroup Global Markets Inc., with additional representation from Barclays Capital; BTPS was represented by PwC and Allen and Overy; and Hermes was represented by Fenchurch Advisory Partners LLP.
Do conflicts of interest in trade routing and execution impact market quality?
Emerging technology presents challenges and opportunities for the buy side.
Greenwich Assoc estimates the industry will spend $700 million in 2018.
The success of the European asset management business is threatened.
The future can be summed up in three words: virtual high touch.