The first result of Janus Henderson Group following the recent merger was a great result with almost all key indicators moving in the right direction.
The highly complementary businesses of Janus Capital Group and Henderson Global Investors merged at the end of May. The Henderson share price had been sold down substantially since the merger was announced due to a range of concerns, including whether synergies would be achieved and potential client losses during the merger process.
This provided Perennial Value with an opportunity to increase exposure to the company at an attractive valuation. A number of the market concerns were allayed by the result. Importantly, the $110million synergy target was reaffirmed and timing of synergy realisation brought forward. Net fund flows were better than expected and the key leading indicator of investment performance has improved across the group. This resulted in higher than expected performance fees. Management fees were also better than expected due to both higher than expected funds under management and a higher fee rate due to the favourable mix of flows.
In our view, the valuation of the company remains undemanding even after the strong price rise on the day after the result. We see the merger as a rare case where the merging businesses are truly complementary.
We expect that over time the stronger Janus Henderson Group will shine through – in terms of not just the cost synergies but also in stronger distribution of the products of the respective former businesses.
For instance, Henderson is strong geographically in Europe and the UK while Janus is strong in the US and Japan. Henderson is strong in Equities and Alternative asset classes, while Janus is strong in Fixed Interest and Quantitative Investing. The stronger global distribution teams across the globe will now be able to sell all of the products of the group in their respective markets.
If these benefits are confirmed, there is both earnings and earnings multiple upside for Janus Henderson.