Strategic acquisition of TSW
PENDAL GROUP (ASX: PDL) today announced it has entered into an agreement to acquire 100% of Thompson, Siegel & Walmsley (TSW), a US-based, value-oriented investment manager, for US$320million (A$413 million).
Established in 1969 and headquartered in Richmond, Virginia, TSW operates primarily in long-only equity (US and international) with US$23.6 billion (A$30.5 billion) of funds under management (FUM).
The acquisition price represents 7.6x 1H21 EBITDA (annualised, excluding synergies) and is expected to be double-digit EPS accretive in the first full year after completion.
Pendal Group Chairman Mr James Evans said: “This is a strategic and compelling opportunity to acquire a highly successful complementary business, which will create immediate value and facilitate our growth opportunities in the US market.
“The acquisition will deliver scale and diversification benefits for Pendal across investment capability, asset classes, geographies and distribution channels.
“The Board believes this acquisition will accelerate shareholder returns and strengthen the diversity of earnings.”
Transaction highlights:
- The acquisition is expected to be double-digit EPS accretive in the first full year after completion.
- Pendal’s consolidated FUM will increase 30% to $A132 billion after the acquisition. Its US client FUM will increase 112% to US$44.7 billion (A$57.8 billion).
- TSW has robust business momentum driven by recent large client wins and strong investment performance. Four out of the six funds (where TSW is the sole sub-advisor) hold a 4/5-star Morningstar rating and rank in the top quartile over the last three-year period.
- The acquisition will double Pendal’s addressable market in the US.
- TSW CEO Mr John Reifsnider will be appointed CEO of Pendal’s combined US business.
- The US$320 million purchase consideration will be funded with a combination of equity, debt and existing capital. Equity will be raised through a fully underwritten placement and — to enable retail shareholder participation — a shareholder purchase plan.
Pendal Group CEO Mr Nick Good said: “TSW is a natural strategic and cultural fit with Pendal and expands our successful diversified business model in the largest equity market in the world.
“TSW is highly complementary to Pendal’s US business, with almost no overlap of investment strategies and clients.
“This will deliver the opportunity to generate new FUM through the expansion of our addressable market in the US and our ability to distribute both TSW and JOHCM products through an expanded global distribution network.
“Both businesses have solid flow momentum and high-performing investment strategies. With this growth profile I believe we will be well placed to take advantage of more opportunities inherent in the positive US economic outlook and increasingly strong investor sentiment globally.”
Highly regarded
TSW is a highly regarded value-oriented investment manager. It has a solid base of institutional and sub-advisory relationships and a track record of strong investment performance. Some 86% of TSW FUM outperformed benchmarks over the past year, highlighting the discernable rotation to value strategies over the past six months.
TSW’s investment capability spans international value, US equity and fixed income.
TSW has an experienced, stable team of 74 employees and a long-tenured and talented investment team of 20, with deep bench-strength across all strategies.
Its recent large client wins are testament to the quality of the team and the momentum of the business. The TSW team are fully supportive of the acquisition and are aligned with Pendal’s values, investment independence philosophy, and its growth aspirations.
Alignment of culture and business models
“Cultural fit is all-important in fund management acquisitions,” said Mr Good. “Both parties have put significant effort into considering compatibility, investment, client approach and alignment and mutual commitment to growth.”
TSW’s CEO Mr John Reifsnider will be appointed CEO of Pendal’s combined US business, taking over the role from Mr Good. Mr Reifsnider will also join Pendal’s global executive committee.
“John is an outstanding leader and the right person to head the combined US business,” said Mr Good. “I have every confidence he will continue to drive the positive momentum that is evident in both companies and seize the new growth opportunities we see ahead of us.”
Mr Reifsnider said: “This is a unique opportunity for TSW to join a strategically compatible and highly regarded global investment management company that is a natural fit and has strong alignment to our investment approach and culture.
“All of us at TSW are thrilled to be joining Pendal Group. We see excellent potential for growth and an exciting future.
“I am delighted to take on the role of CEO of the combined businesses. Pendal has been very successful in the US with an extraordinary 10 consecutive years of positive flows and an enviable reputation in the market.
“Investment autonomy is fundamental to both our businesses and to our success. That match has been a very important consideration for the TSW team.”
Mr Good said: “Pendal’s acquisition of JOHCM was a success. We are approaching this acquisition of TSW with the same intent and focus and are confident that we will be able to implement a seamless transition.”
Equity raising
To fund the acquisition Pendal is undertaking a fully underwritten placement to raise A$190 million through the issue of 27.9 million new fully paid shares, representing about 8.6% of current issued capital.
Details of the offer can be found on Pendal’s shareholder webpage here.
The shareholder purchase plan (SPP) will open on May 17, 2021 and close on June 7, 2021.
The SPP is subject to the terms set out in the SPP offer booklet, which is expected to be lodged with the ASX and sent to eligible retail shareholders following the opening of the SPP offer on May 17, 2021.
Pendal expects to complete the transaction in the September quarter, 2021.
Further details are set out in the investor presentation provided to the ASX [PDF download] on Monday, May 10, 2021.
The investor presentation contains important information including key risks and foreign selling restrictions with respect to the Offer.
This presentation can also be accessed on the Pendal website at https://investors.pendalgroup.com/Investor-Centre.
Webcast details
Pendal will present in relation to its 1H21 half year financial results and the acquisition of TSW today, Monday May 10 at 10.30am AEST. The webcast of the results announcement will be available live at https://webcast.openbriefing.com/7243.
If you wish to view the presentation live via the webcast we recommend logging in 10-to-15 minutes prior to start time.
About Thompson, Siegel and Walmsley
TSW is a US-based value-oriented investment management company, operating primarily in the long-only equity (international and US) and fixed income asset classes with US$23.6 billion of FUM at March 31, 2021.
Established in 1969 and headquartered in Richmond, Virginia, TSW is 75.1% owned by the NYSE listed BrightSphere Investment Group (BSIG), but operates as an independent, autonomous, indirect subsidiary. The remaining 24.9% of shares in TSW are held by TSW current and former management.
TSW has a well-known record in attracting and retaining investment talent, with an average tenure of 12 years among the investment team members.
About John Reifsnider
John has been CEO of TSW since January 2021 and has been with the firm for more than 15 years. He was appointed Co-President of TSW in September 2018 overseeing the day-to-day management of the firm and serving as member of the Board of Managers.
Prior to that, he was the Head of Distribution. He remains highly engaged in TSW’s distribution activities. Before joining TSW in 2005, he was Managing Director at Atlantic Capital Management, responsible for business development and client service.
John started his career in the investment industry in 1990.
John earned his BBA from the University of Toledo, is currently registered with FINRA, and is registered as an Investment Adviser Representative. He is an active volunteer for non-profit youth sports organisations.
About Pendal
Pendal Group is an independent global investment manager focused on delivering superior investment returns for clients through active management. Pendal manages A$101.7 billion in FUM (at March 31, 2021) through J O Hambro UK, Europe & Asia; JOHCM USA; Pendal Australia and Regnan.
Pendal operates a multi-boutique style business across a global marketplace through a meritocratic investment-led culture. Its experienced, long-tenured fund managers have the autonomy to offer a broad range of investment strategies with high conviction based on an investment philosophy that fosters success from a diversity of insights and investment approaches.
Listed on the ASX since 2007 (ASX: PDL), the company has offices in Sydney, Melbourne, London, Prague, Singapore, New York, Boston and Berwyn.
This announcement contains certain “forward-looking statements”, including projections, potential synergies and estimates, the timing and outcome of the acquisition, the outcome and effects of the Placement and the SPP and the use of proceeds, and the future performance of Pendal and TSW post-acquisition. Forward looking statements can generally be identified by the use of forward looking words such as “expect”, “anticipate”, “estimate”, “intend”, believe”, “guidance”, “should”, “could”, “may”, “will”, “predict”, “plan” and other similar expressions within the meaning of securities laws of applicable jurisdictions and include, but are not limited to, statements relating to the impact of the acquisition, the future performance and financial position of Pendal, estimated synergies after combination with TSW, the outcome and effects of the Placement and the SPP and the use of proceeds. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statement. While due care and attention has been used in the preparation of forward-looking statements, forward looking statements, opinions and estimates provided in this announcement are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends which are based on interpretations of current market conditions.
Forward looking statements are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of Pendal and its directors and management. A number of important factors could cause Pendal’s actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements, including the risk factors described in the “Key Risks” section of the investor presentation released on 10 May 2021.
Actual results, performance or achievements may vary materially from any forward-looking statements and the assumptions on which statements are based. To the maximum extent permitted by law, Pendal and its directors, officers, employees, agents, associates and advisers disclaim any obligations or undertaking to update publicly any forward looking statements, whether as a result of new information, future events or results or otherwise.
Financial information
All financial information in this announcement is in US Dollars (US$ or USD) unless otherwise stated. The financial information for TSW contained in this announcement has been derived from the audited consolidated annual accounts of TSW and other financial information made available by BSIG and TSW in connection with the acquisition. Pendal has not been able to verify, and accordingly does not take responsibility for, the accuracy, reliability or completeness of such financial information.
Investors should be aware that certain financial measures included in this announcement are ‘non-IFRS financial information’ under ASIC Regulatory Guide 230: ‘Disclosing non-IFRS financial information’ published by ASIC and also ‘non-GAAP financial measures’ within the meaning of Regulation G under the U.S. Securities Exchange Act of 1934, and are not recognised under AAS and International Financial Reporting Standards (IFRS). Non-IFRS financial information/non-GAAP financial measures in this announcement include EBITDA. Such non-IFRS financial information/non-GAAP financial measures do not have a standardised meaning prescribed by AAS or IFRS. Therefore, the non-IFRS financial information may not be comparable to similarly titled measures presented by other entities, and should not be construed as an alternative to other financial measures determined in accordance with AAS or IFRS. Although Pendal believes these non-IFRS financial measures provide useful information to investors in measuring the financial performance and condition of its business, investors are cautioned not to place undue reliance on any non-IFRS financial information/non-GAAP financial measures included in this announcement.
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This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or in any other jurisdiction in which such an offer would be illegal. The New Shares have not been, and will not be, registered under the U.S. Securities Act of 1933 (U.S. Securities Act), or the securities laws of any state or other jurisdiction of the United States. Accordingly, the New Shares may not be offered, sold or resold to persons in the United States or persons who are acting for the account or benefit of a person in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and any other applicable securities laws of any state or other jurisdiction of the United States.
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