Shares in Man Group Plc (EMG), the world’s largest publicly traded hedge-fund manager, rose the most in more than three months after it said it would buy Boston-based Numeric Holdings LLC for as much as $494 million.
Man Group shares closed up 6 percent to 105.1 pence in London trading today, giving it a market value of 1.85 billion pounds ($3.2 billion). It was the biggest gain since Feb. 28.
Man Group will pay $219 million in cash and as much as $275 million more to Numeric management and employees five years after the completion of the deal, depending on the profitability of the business, the London-based company said in a statement today. Numeric, a closely held firm that trades stock based on signals from mathematical models, manages $14.7 billion, Man Group said.
“This appears to us to be a well-priced deal, which is expected by the company to be earnings accretive from completion,” Phil Dobbin, an analyst at Espirito Santo Investment Bank, wrote in a note to clients.
Man Group has sought to diversify its range of funds and expand in the U.S. after its stock price slumped 67 percent since 2010. The Numeric acquisition will help Man Group do both, Chief Executive Officer Emmanuel Roman said in the statement. Numeric has an “excellent track record of performance and innovation,” he said.
Numeric will boost Man Group’s assets under management by 27 percent to about $70 billion, analysts at Goldman Sachs Group Inc. wrote in a note to clients. Goldman Sachs has a neutral rating on the stock.
The deal “makes strong strategic sense,” Philip Middleton, an analyst at Bank of America Corp., who has a buy rating on Man Group’s stock, wrote in a note to clients. “Numeric has been performing well, and so its product range should prove sellable.”
The hedge-fund manager said in its full-year results for 2013 that it had $550 million of surplus regulatory capital with which to pursue acquisitions.
Man Group said this month it would buy Pine Grove Asset Management LLC, a New Jersey-based investment firm that manages about $1 billion. It said after the Numeric deal it would have about $200 million in surplus regulatory capital remaining.
Lang Wheeler founded Numeric in 1989 after working for State Street Corp. TA Associates Inc., a Boston-based private-equity firm, acquired a minority stake in Numeric through a $240 million recapitalization in 2004. Its investment funds are primarily “long-only,” meaning they don’t bet on falling stock prices and charge investors lower fees than hedge funds.
Credit Suisse Group AG and PL Advisors helped Man Group with the acquisition, with Barclays Plc and Freeman & Co. advising Numeric, the companies said.
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