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Federated (FII) Acquires 60% Stake in London-based Hermes

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Moving forward with its expansion moves, Federated Investors, Inc. FII concluded the deal with BT Pension Scheme (BTPS), under which the company has acquired majority interest in London-based Hermes Fund Managers Limited — operating as Hermes Investment Management — a pioneer of integrated ESG investing.

The deal, announced in April, has been funded through a combination of cash and an existing revolving credit facility by Federated. The company has acquired 60% stake in Hermes from BTPS for £246 million (about $350 million). Moreover, an additional £13.9 million has been paid for Hermes' projected excess regulatory capital. This sums the purchase price of the deal to £259.9 million ($341.5 million).

Around 29.5% stake has been retained by BTPS in Hermes. Additionally, BTPS will continue to be an investor in Hermes' strategies as a customer. Notably, BTPS has transferred approximately 10.5% share in Hermes to an employee-benefit trust in a bid to help certain members of management and other employees of the latter.

"We are excited to join forces with the outstanding people at Hermes. Our work together since we announced the deal has reinforced our mutual commitment to shared values in meeting client needs," said J. Christopher Donahue, president and chief executive officer of Federated. "As environmental, social and governance considerations play a growing role in investment portfolios, we look forward to bringing Hermes' well-performing ESG integrated investment strategies to U.S. investors — through institutional separate accounts, mutual funds and ESG-related consultancy services," he further added.

As of Mar 31, 2018, Hermes holds $47.2 billion (£33.6 billion) of assets under management across 16 differentiated strategies in high-active share equities, credit and private markets, including infrastructure, private debt, real estate and private equity. Through wholesale and institutional markets, Hermes serves more than 550 clients. Therefore, on completion, the combined entity holds around $442.2 billion (£327.6 billion) in assets under management.

Saker Nusseibeh, chief executive of Hermes Investment Management, said, "Today, Hermes joins with Federated to form a truly global asset manager dedicated to active managementwith mutually beneficial distribution capabilities that leverage both Federated's extensive network of financial intermediaries in the U.S. and Hermes' fast-growing client base in the U.K, continental Europe and Asia."

For the above-mentioned deal, Citigroup Global Markets Inc., a unit of Citigroup C, and Barclays Capital, a subsidiary of Barclays PLC BCS, acted as Federated's financial advisors.

Federated currently carries a Zacks Rank #4 (Sell). Shares of the company have lost around 34.2% over the past six months compared with the nearly 9.3% decline recorded by the industry.


 

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