RPT-BREAKINGVIEWS-Janus Henderson bidding war: more is less

By Jonathan Guilford

NEW YORK, March 11 (Reuters Breakingviews) - Like any money manager, Janus Henderson JHG.N considers itself a savvy judge of risk. It's now the decisive issue in a takeover battle for the firm. The board has rejected a $9 billion offer from smaller rival Victory Capital VCTR.O, citing proposed cost cuts as potentially disastrous. Despite being a richer deal than the one agreed earlier with Nelson Peltz's Trian Fund Management, it's a rare case of price only telling half the story.

Victory has tried to crash the party as far back as during the negotiations between Janus and Trian. The hedge fund manager already owns a nearly 21% stake, and any change in control requires securing two-thirds of the vote. This raises the bar for the interloper.

It started the effort with a bigger number. Victory dangled $30 in cash and about $27 in stock for each Janus share, 16% more than Trian's $49-a-share all-cash offer. Nearly $500 million in proposed annual cost savings, equivalent to a quarter of the target's operating expenses last year, sweetened the pot even more. Tax and capitalize those synergies, and Janus shareholders are getting the equivalent of almost $67 apiece in total.

In this case, however, more is less. The Janus board argues that the extent of the cuts would disrupt back-office functions, cause it to lose key staff and scare off clients. And although Victory is experienced in major acquisitions, having swallowed Amundi’s U.S. business and its $104 billion of assets in 2024 and others, this is bigger quarry. Janus manages 54% more money.

Adjusting the deal terms to address the concerns would be tricky. If Victory swaps out more cash for stock, the cost savings carry less weight. For every $1 worth of equity replaced, based on Victory’s share price when it unveiled its bid, Janus shareholders would lose more than 20 cents of synergy value, Breakingviews calculates.

Putting up all cash, like Trian, would also be tough. Victory contemplates issuing $4.1 billion in new debt for its existing proposal, nearly equivalent to its market capitalization. Paying entirely in hard currency would double that number.

In simple terms, Victory's offer is unquestionably the better one. Janus shares also have jumped beyond Trian's bid, to more than $50. Peltz may need to scrounge up a bit more, but in this unusual case, might also get away with less than the competing bid.

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CONTEXT NEWS

Asset manager Janus Henderson said on March 11 that its board had rejected an unsolicited takeover proposal from smaller peer Victory Capital, arguing that the amount of cost cutting proposed in the deal would degrade the business.

Victory offered $30 in cash and 0.35 of its shares, implying a value of $57.04 for each Janus share as of February 26, when it submitted the bid.

Janus agreed in December to sell itself to Trian Fund Management and General Catalyst for $49 a share in cash. Trian holds a nearly 21% stake in Janus.

The Janus board said Victory's $500 million of promised synergies would disrupt systems and services and lead to staff attrition. According to the terms of Victory’s proposal, 75% of clients must consent to proceed with the deal. Janus said that based on client feedback its directors are concerned about securing that level of consent.

Goldman Sachs is advising a special committee of Janus Henderson's board. PJT Partners is advising Victory Capital. Jefferies and Citigroup are advising Trian and General Catalyst.