Man, GLG In $1.6 Billion Merger

May 17 2010 | 11:23am ET

The Man Group will pay US$1.6 billion to buy GLG Partners in a move that could once again make the firm the world’s largest hedge fund manager.

The cash-and-stock deal will give the combined company more than US$62 billion in assets. While that’s still far below US$79.5 million that Man managed before the economic crisis, it is more than the total managed by the world’s biggest hedge fund manager, JPMorgan Asset Management, which had US$53.5 billion at the beginning of the year, according to Pensions & Investments.

GLG has US$23.7 billion in assets to Man’s US$39.1 billion.

The deal will pay GLG shareholders US$4.50 per share, a 55% premium to their closing price on Friday. GLG, though, like Man, based in London, is listed on the New York Stock Exchange; the firm went public through a reverse-merger two-and-a-half years ago. At the time, GLG shares went for as much as US$14.60.

GLG executives, who own just under half of the firm, will do slightly less well, receiving Man shares that value their GLG shares at US$3.50 apiece. The GLG employees have agreed not to sell their Man shares for three years.

Of the at least US$560 million in Man shares to be divvied up by the GLG executives, firm co-founder Pierre Lagrange will get about US$250 million. GLG co-CEOs Noam Gottesman and Emmanuel Roman will each receive about US$5.6 million in stock and US$79 million in cash.

Gottesman called the merger a “transformational step for GLG.”

“The combination of Man's outstanding distribution and structuring capabilities together with our industry leading investment teams will benefit all stakeholders, particularly investors in our funds whose interests will be exceptionally well served from within the combined group.” He said.

The deal is expected to close in September. Man said it offers the combined firm potential cost savings of US$50 million over the next two fiscal years.

GLG will be a wholly-owned subsidiary of Man following the closing.

“Today we have announced a transaction with GLG which positions Man as the industry leader in liquid, alternative investment strategies,” Man CEO Peter Clarke said. “The combination will provide comprehensive and compelling investment solutions to our investors worldwide, meeting investor demands head on and providing the acumen and flexibility investors are seeking in today's rapidly changing markets.”

Man has recently been the subject of takeover rumors itself—BlackRock, the world’s largest money manager, was said to be interested in buying the world’s largest publicly-listed hedge fund manager. But the firm, which has seen its assets under management, profit and the performance of its flagship AHL strategy plummet in recent years, was scouting for an acquisition or distribution deal that would give it greater access to the U.S. market and diversify its hedge fund portfolio away from AHL, which accounts for roughly half of its assets under management.

Before doing the deal with GLG, Man reportedly spoke with SAC Capital Advisors and Millennium Partners.

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