Henderson takes over Gartmore Distressed fund manager bought after year of woe

15 January 2011

Henderson buys Gartmore

The Henderson takeover of Gartmore is thought to be worth £335m. 

Fund manager Gartmore has been bought by rival asset investment managers Henderson Group in a deal worth £335m, after weeks of speculation and uncertainty surrounding the financial health of the company.

The deal will see Henderson Global Investors manage around £78 billion, making it one of the largest retail asset managers in the UK. A significant number of Gartmore managers, representing 84% of the firm’s assets under management, have agreed to join Henderson, and the Gartmore brand will be scrapped.

What is Gartmore’s background?

Gartmore was launched in 1969 as an equity investment specialist, and has been bought and sold many times over the years. It was taken over by NatWest in 1996 and subsequently sold to Nationwide Mutual for £1bn, and again sold onto private equity firm Hellman & Friedman in 2006 at a loss of £450m.

Gartmore identified itself as an absolute return specialist, running portfolios for institutional and professional investors since the late 1990s. It was also one of the first fund managers to set up a China-specific fund in 1983, and also the first to introduce a UK registered emerging markets fund in 1987.

But in December 2009, the company decided to list on the London Stock Exchange. Shares were issued at £2.20 each but within nine months of listing, things took a turn for the worse.

Where did it go wrong for Gartmore?

Gartmore’s portfolio of investment funds was largely built around ‘star’ fund managers – individuals with big reputations that drew in interest and new money from investors attracted to their name. But when one of their longest standing managers, Gervais Williams, resigned after 17 years at the firm, the firm's reputation began to tumble.

Firstly, manager Guillame Rambourg was suspended from the company in March 2010 after he fell foul of trading rules for listed companies. In the wake of this, Dominic Rossi and Darrell O’Dea left the company and were swiftly followed by the shining light in Gartmore’s portfolio of star managers, Roger Guy.

When Guy retired, panic began to spread within the market about the survival of Gartmore as a going concern. Its share price stood at £1.00 in mid December, as investors in the company lost confidence and retail and institutional clients began to pull their money out of Gartmore’s funds.

What are the terms of Henderson’s deal with Gartmore?

After weeks of speculation and Gartmore’s announcement of its hope for a buyout late last year, Henderson Global Investors purchased the company. Henderson has previous experience with distressed fund managers, having purchased New Star in 2009.

Under the terms of the deal, Henderson has bought Gartmore for £335m. This values Gartmore’s shares at 92.1 pence. Gartmore shareholders will receive two Henderson shares, currently valued at £1.38 per share, for every three Gartmore shares that they own.

Henderson will acquire 50 mutual funds for around 174,000 investors, many of which they will merge with their existing funds. It will also inherit £17 billion in assets under management. Henderson fully expects to have client administration and all fund mergers complete by summer 2011.

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