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Australian fund manager HFA Holdings said yesterday it would buy US investment firm Lighthouse Partners for about A$707 million ($783 million), sending shares in HFA soaring over 18 per cent.
The purchase will more than double the size of HFA, and cements a near decade-long relationship with Lighthouse funds in Australia and New Zealand, and is a rare example of an Asia Pacific money manager making acquisitions outside the region.
"A US-based fund with a major US bank shareholder selling out to an Australian listed [fund] manager is quite an unexpected transaction," said BT Financial portfolio manager Jack Chemello. More typically, international financial firms have bought into Asia. These include deals over the last 18 months by Swiss bank UBS, ING Group and Credit Suisse.
Lighthouse offers funds with mainly institutional clients including companies, pension funds and university endowments, while HFA offers similar funds to retail investors.
Investors welcomed the deal, sending HFA's shares up 18.5 per cent to A$2.75.
Powered by rising fee income, merger and acquisition activity in the global investment management industry set records last year.
The number of deals announced among global asset managers rose to 189 in 2006 from the then-record 159 deals in 2004 and 143 deals in 2005, investment bank Putnam Lovell NBF Securities said in January.
HFA, which listed on the Australian Stock Exchange last year, said the offer price is about 11 times Lighthouse's estimated earnings for 2008.
BT's Chemello said while the valuation seemed low for a fund manager, fund-of-fund managers especially with an institutional client basis typically trade on a lower multiple than primary managers.
HFA will offer US$348.5 million ($432 million) in cash and 134.67 million HFA shares for Lighthouse. The merged entity will have assets under management of US$8 billion.
Lighthouse is 24.9 per cent owned by SunTrust Banks, the seventh-largest US bank, and 75.1 per cent owned by management.
- REUTERS
