Man Group to buy GLG Partners for $1.6 billion

By The Associated Press The Associated Press

Man Group plc, the world's largest publicly traded hedge fund, said Monday it's acquiring GLG Partners for $1.6 billion in cash and stock. The combined company will manage $63 billion in assets worldwide.

Shares of GLG soared $1.40, or 48 percent, to $4.32 in morning trading. Man Group shares fell by 8.4 percent to 202.90 pence ($2.95) on the London Stock Exchange.

GLG brings to Man Group a portfolio of nearly $24 billion in assets. Man Group has faced declining assets under management — it had $39 billion on March 31, down from $46.8 billion a year ago. GLG also adds a discretionary style of investing to Man Group, which focuses on quantitative strategies.

Man Group said it will pay for the acquisition with internal funds. But the U.K. firm is lowering its dividend to at least 22 cents per share in 2011, down from 44 cents. Analysts have expected a dividend cut given the declining amount of funds under management, which in turn leads to lower annual management fees collected.

Under terms of the deal, Man Group will pay $4.50 per share for each GLG stock, a 55 percent premium to GLG's closing price on Friday.

The hedge fund firm will exchange 1.0856 of its shares for each share held by three GLG principals, a value of about $3.50 per share that will be capped at $4.25 per share. The three executives are Noam Gottesman, chairman and co-CEO, Pierre Lagrange, senior managing director, and Emmanuel Roman, co-CEO.

The GLG principals have a lock-up agreement in which they can't sell Man's shares for three years after the transaction's close, which is expected by the end of September.

Man Group said the acquisition should generate savings of $50 million a year, with a third realized in fiscal 2011 and the rest within the first six months of 2012.

The GLG deal is expected to add to earnings in fiscal 2012.