Shares of Man Group Plc. (LON:EMG) surged as much as 6.7 percent, to 96 pence at the London Stock Exchange, on reports that BlackRock would submit a proposal to take over the embattled hedge fund company.
A report from This is Money cited that a group of bidders, including BlackRock, Inc. (NYSE:BLK) might buy Man Group Plc. (LON:EMG) for £2.5 billion, or 140 pence per share.
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According to the report, Man Group’s acquisition of FRM Holdings, a global hedge fund and investment research specialist, for £51million, added value to the company, making it more attractive to interested bidders.
In September, the hedge fund manager outlined its restructuring plan, including its proposal to establish a new holding company called Man Strategic Holding Plc., and to streamline its capital base.
A report from Bloomberg cited that the assets under Man Group’s portfolio declined from $71 billion to $52.7 billion in June this year. The weak performance of Man Group’s flagship AHL fund, worth $19.5 billion, pulled the stock value of the company downwards, due to the European debt crisis. Shares of the company traded as low as 61.10 pence per share during the 52-week range.
RBS Capital Markets analyst Peter Lenardos dismissed the report that BlackRock or another company will acquire Man Group. According to him, BlackRock’s acquisition of Man Group is unlikely, and it is not a strategic stake for the fund.
In a note to investors, Leonardos said, “Our opinion regarding a takeover of Man Group remains unchanged, despite the press report. It is possible but remains unlikely. We do not see the logic of acquiring a company whose funds, in our opinion, are under-performing key benchmarks and are experiencing net outflows.”
In addition, he believes “AHL is priced above competitors, despite having weaker performance.”
Shares of Man Group declined by 26 percent, anddropped out of the FTSE 100 index this year. Moody’s downgraded the hedge fund’s credit rating to Baa3, due to declining revenues, poor performance, and sliding management fees.
The stock value of the hedge fund closed at 93.40 pence per share, up by 3.84 percent in London on Wednesday. The company’s market value is approximately $2.7 billion, or £1.7 billion.
The spokespersons of Man Group Plc. (LON:EMG) and BlackRock did not provide any comment regarding the issue. BlackRock is committed to growing organically, so an acquisition would seem unlikely, but not out of the question.
Man Group is scheduled to report its third quarter earnings on October 18. It would be an opportune time to sell. RBC capital markets notes, Man reported $1.0bn in net outflows, which increased to $1.4bn in net outflows in Q2. In Q3, they believe that net outflows accelerated to $2.5bn and occurred across all product lines.
If Man Group reports a net outflow in Q3, this will be the company’s fifth consecutive quarter of net outflows.
Man Group currently has approximately $60 billion of assets under management, making it one of the world’s largest hedge fund companies.