Janus Strikes Dai-Ichi Deal Looking to Stem Redemptions
Janus Capital Group Inc. (JNS), the fund company struggling to reverse 12 quarters of investor redemptions, lined up support from Japan’s second-largest life insurer, sending its shares up the most in two years.
Dai-ichi Life Insurance Co. (8750), based in Tokyo, will buy a stake of as much as 20 percent in Denver-based Janus, owner of the Janus, Intech and Perkins funds, and plans to take a seat on the firm’s board of directors, according to a statement today. The life insurer will also invest $2 billion into Janus funds and help distribute them in Japan. Janus rose 10 percent to $8.46, the biggest gain since July 2010.
“We think this is an undervalued asset and it may be a chance to get in at a good time,” Macrae Sykes, an analyst for Rye, New York-based Gabelli & Co., said today in a telephone interview. Sykes, who has a buy recommendation on the stock, expects Janus to use some of the money to create new products.
Janus Chief Executive Officer Richard M. Weil, a former executive at Pacific Investment Management Co., the bond-fund manager co-founded by Bill Gross and now owned by German insurer Allianz SE (ALV), is partnering with Dai-Ichi Life as falling markets and client withdrawals erode assets and the fees charge for overseeing them. Janus lost 47 percent of its market value over the past three years through Aug. 9.
“The fundamental story for Janus’ core equity business remains the same,” Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York, said today. “They are still dealing with sizeable redemptions and performance is an issue,” said Kim, who has a sell rating on the stock.
Janus announced the deal a day after Los Angeles-based TCW Group Inc. ended 11 years under the ownership of Societe Generale SA, France’s second-largest bank, through a buyout led by Carlyle Group LP (CG) that will give management a 40 percent stake.
Weil said he had been talking to Dai-ichi about a relationship since he first came to Janus in 2010. The deal, he said, will help Janus’s efforts to diversify, both internationally and in its lineup of products. A “significant portion” of the money Dai-ichi invests with Janus will be in fixed-income, he said.
“We are a high beta stock with a large exposure to equities,” Weil said in an interview. “Moderating that will make us a stronger company. Fixed income is too small a part of our business.”
Before today, Janus had risen 22 percent this year, compared with an 11 percent increase in Standard & Poor’s 20 member index of asset managers and custody banks.
“Janus is a powerful franchise in the largest asset management market in the world,” said Hideto Masaki, representative director and deputy president of Dai-ichi Life. “We are confident in Janus’ quality and leadership, and we are very pleased to acquire a substantial stake in the future growth of the firm at a level that we believe offers significant upside.”
The purchase is Dai-ichi Life’s first overseas acquisition in asset management. The Japanese insurer plans to purchase between 15 percent to 20 percent of Janus stock within one year on the open market and potentially through options issued by Janus, according to the statement.
Dai-ichi Life, which agreed to buy Tower Australia Group Ltd. for A$1.2 billion ($1.3 billion) in December 2010, has existing life insurance businesses covering four countries.
Shares of Dai-ichi Life rose 1.1 percent to 80,900 yen at the close on the Tokyo Stock Exchange today before the statement was released. The stock has advanced 8.3 percent this year, outperforming the 4.3 percent gain by the six-member Topix Insurance Index.
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