Man is king with RMF swoop

Patrick Hosking12 April 2012

THE Man Group today hailed itself as the biggest hedge fund manager in the world after splashing out $833m(£571m) in cash and shares to buy Swiss rival RMF. Man, which has grown from a tiny commodity trader to Footsie status on the back of the hedge funds boom, is paying $510m in cash and the balance in newly issued shares for RMF.

The deal is partly being financed through a $260m placing of new shares, which was successfully completed within an hour of brokers Merrill Lynch opening the book this morning and three times covered at a price of 900p. After initially falling sharply, the shares rallied to 944p, down 4p.

RMF, which specialises in managing hedge funds for institutional investors, particularly Swiss insurance companies, was founded onnly in 1992 but its funds under management have grown a spectacular 18-fold in the past four years to $8.5bn.

The deal produces an Alps-sized return for founder Rainier-Marc Frey, 38, who will receive $321m, mostly in cash. Many of the other 180 employees will also share in the payout. Man chief executive Stanley Fink said he was 'relaxed' about the price and about having to pay the bulk of the consideration in cash. 'It's natural they want to take a few chips off the table,' he said. The price, at more than 10% of funds under management, is very expensive by conventional fund management terms but less exceptional for hedge funds, where margins can be very fat.

There were 'amazing synergies' to be had from the acquisition on the cost and revenue side, Fink said. The price put RMF on a multiple of earnings in the low 20s, he said. The deal would be earnings neutral in 2003 and enhancing thereafter.

Man chairman Harvey McGrath said the deal was transformational for Man, broadening its product range, improving access to asset management capacity and diversifying the client base.

The deal seals the enlarged Man's position as the undisputed number one in hedge funds with $20bn of funds. The second biggest is Global Asset Management, part of Union Bank of Switzerland, with about $12bn under management. Man today reported a 21% increase in pre-tax profits to £193m, at the top end of City expectations.

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