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Federated (FHI) to Buy Remaining Stake in Hermes Fund Managers
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Moving forward with its expansion moves, Federated Hermes, Inc. (FHI - Free Report) has agreed to acquire the remaining 29.5% interest in London-based Hermes Fund Managers Limited from BT Pension Scheme (BTPS).
Federated Hermes had acquired a 60% majority interest in Hermes Fund Managers, a pioneer of integrated environmental, social and governance (ESG) investing, in 2018. The deal garnered a call option for Federated Hermes to buy the rest of Hermes Fund Managers and rendered BTPS a put option to sell its residual shareholding in it.
In both cases, the time granted was between three-to-six years after the original agreement. BTPS and Federated Hermes have come to a consensus with respect to an independent fair valuation of Hermes Fund Managers at £394.9 million (nearly $547.4 million).
Resultantly, Federated Hermes will pay £116.5 million (nearly $161.5 million) to BTPS for its residual stake. Federated Hermes will fund the deal via a combination of cash and borrowings from its current credit line.
Though BTPS will no longer bear an ownership interest in Hermes Fund Managers, it will be a major client, with assets under management worth $12 billion, invested in numerous Federated Hermes’ sponsored or managed investment products, including $10.1 billion in long-term private markets strategies, as of Jul 31, 2021.
J. Christopher Donahue, president and CEO of Federated Hermes, remarked, "Over the past three years, our shared values and mutually beneficial areas of expertise have given us the opportunity to engage with BTPS and enjoy an open dialogue with them as a key client and owner. Our combined investment management, stewardship and distribution experience make it prudent for FHI to complete this deal in a timely fashion so that we can continue to focus on expanding our investment and stewardship capabilities while growing our global distribution footprint."
Hermes Fund Managers holds $43.9 billion of assets under management across strategies in equities, fixed income, commodities, real estate, hedge funds, private equity, and infrastructure.
Saker Nusseibeh, chief executive of Hermes Fund Managers, noted, "Completing this transaction represents an important milestone for our firms and is a consequence of the close collaboration and cultural fit we have enjoyed since Federated Hermes acquired its majority share in 2018. Since then, we have worked closely as a team and with Federated Hermes' support we have implemented growth plans and invested in the overall business, which has had assets increase from £33.6 billion to £43.9 billion."
Morten Nilsson, CEO of BTPS, said, “We retain strong links with HFML and look forward to working with them as we focus on managing £57.5 billion in assets towards our 2035 Net Zero goal as a responsible and engaged investor on behalf of our members."
Many finance companies have started to come ahead and participate in ESG investing for the past couple of years.
In July 2021, Affiliated Managers Group (AMG - Free Report) announced that it will acquire majority equity stake in Parnassus Investments, one of the largest sustainable investing fund managers in the United States. Earlier this February, it announced a deal with Boston Common Asset Management, LLC, an independent, partner-owned global equity manager that focuses on integrated ESG impact investing.
In the same month, The Blackstone Group Inc. (BX - Free Report) inked a $1.4-billion deal to acquire Sphera, a pioneer in providing environmental, social and governance software, data and consulting services. The move was part of the private equity giant’s efforts to directly impact the transition to a low-carbon economy and provide ESG-focused investment opportunities.
This June, JPMorgan (JPM - Free Report) signed a deal to acquire San Francisco-based financial technology start-up, OpenInvest, to bank on its ESG skills with 55ip's tax-smart investment strategies, in order to offer personalized solutions to clients “that are values-aligned and tax-efficient.” Apart from this, the bank’s asset management division — J.P. Morgan Asset Management — also announced the acquisition of Campbell Global, LLC, a forest management and timberland investing company to integrate sustainability into its business.
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Federated (FHI) to Buy Remaining Stake in Hermes Fund Managers
Moving forward with its expansion moves, Federated Hermes, Inc. (FHI - Free Report) has agreed to acquire the remaining 29.5% interest in London-based Hermes Fund Managers Limited from BT Pension Scheme (BTPS).
Federated Hermes had acquired a 60% majority interest in Hermes Fund Managers, a pioneer of integrated environmental, social and governance (ESG) investing, in 2018. The deal garnered a call option for Federated Hermes to buy the rest of Hermes Fund Managers and rendered BTPS a put option to sell its residual shareholding in it.
In both cases, the time granted was between three-to-six years after the original agreement. BTPS and Federated Hermes have come to a consensus with respect to an independent fair valuation of Hermes Fund Managers at £394.9 million (nearly $547.4 million).
Resultantly, Federated Hermes will pay £116.5 million (nearly $161.5 million) to BTPS for its residual stake. Federated Hermes will fund the deal via a combination of cash and borrowings from its current credit line.
Though BTPS will no longer bear an ownership interest in Hermes Fund Managers, it will be a major client, with assets under management worth $12 billion, invested in numerous Federated Hermes’ sponsored or managed investment products, including $10.1 billion in long-term private markets strategies, as of Jul 31, 2021.
J. Christopher Donahue, president and CEO of Federated Hermes, remarked, "Over the past three years, our shared values and mutually beneficial areas of expertise have given us the opportunity to engage with BTPS and enjoy an open dialogue with them as a key client and owner. Our combined investment management, stewardship and distribution experience make it prudent for FHI to complete this deal in a timely fashion so that we can continue to focus on expanding our investment and stewardship capabilities while growing our global distribution footprint."
Hermes Fund Managers holds $43.9 billion of assets under management across strategies in equities, fixed income, commodities, real estate, hedge funds, private equity, and infrastructure.
Saker Nusseibeh, chief executive of Hermes Fund Managers, noted, "Completing this transaction represents an important milestone for our firms and is a consequence of the close collaboration and cultural fit we have enjoyed since Federated Hermes acquired its majority share in 2018. Since then, we have worked closely as a team and with Federated Hermes' support we have implemented growth plans and invested in the overall business, which has had assets increase from £33.6 billion to £43.9 billion."
Morten Nilsson, CEO of BTPS, said, “We retain strong links with HFML and look forward to working with them as we focus on managing £57.5 billion in assets towards our 2035 Net Zero goal as a responsible and engaged investor on behalf of our members."
Federated Hermes currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 19.7% over the past six months compared with the 24.7% rally recorded by the industry. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Image Source: Zacks Investment Research
Competitive Landscape
Many finance companies have started to come ahead and participate in ESG investing for the past couple of years.
In July 2021, Affiliated Managers Group (AMG - Free Report) announced that it will acquire majority equity stake in Parnassus Investments, one of the largest sustainable investing fund managers in the United States. Earlier this February, it announced a deal with Boston Common Asset Management, LLC, an independent, partner-owned global equity manager that focuses on integrated ESG impact investing.
In the same month, The Blackstone Group Inc. (BX - Free Report) inked a $1.4-billion deal to acquire Sphera, a pioneer in providing environmental, social and governance software, data and consulting services. The move was part of the private equity giant’s efforts to directly impact the transition to a low-carbon economy and provide ESG-focused investment opportunities.
This June, JPMorgan (JPM - Free Report) signed a deal to acquire San Francisco-based financial technology start-up, OpenInvest, to bank on its ESG skills with 55ip's tax-smart investment strategies, in order to offer personalized solutions to clients “that are values-aligned and tax-efficient.” Apart from this, the bank’s asset management division — J.P. Morgan Asset Management — also announced the acquisition of Campbell Global, LLC, a forest management and timberland investing company to integrate sustainability into its business.