The BT Pension Scheme (BTPS) is to sell two-thirds of its interest in Hermes Fund Managers, the investment company it founded 35 years ago, to American asset manager Federated Investors for £246m.
Under the deal announced today, the BTPS will see its interest in Hermes slashed from 89.5% to 29.5%, with the 60% transferred to Federated Investors through a combination of cash and an existing revolving credit security. The final 10.5% will be retained by members of Hermes management.
With Hermes becoming a subsidiary of Federated, the combined organisations will manage approximately £327.6bn in assets under management, with £33bn from Hermes and just under £300m from Federated. Further shares may be bought or sold between the two firms over the next three to six years.
Approval has already been granted by the boards of the BTPS and Federated, although further regulatory approval is required in the UK, Singapore, and other jurisdictions where Hermes is based.
Upon completion, the asset manager's board will comprise an independent non-executive chairman and representatives from Federated, BTPS, Hermes' executive leadership, and two independent non-executive directors.
BTPS chairman Paul Spencer said Federated's values aligned with Hermes and would be beneficial for members.
"Hermes has delivered excellent investment performance and stewardship to the scheme over many years, operating initially as our in-house manager and, in recent years, building on this capability to develop a strong multi-client business," he said. "This transaction is the next step in the evolution of Hermes, as it continues to expand its global business.
"In Federated, we have identified a firm with shared values and beliefs that will both help grow Hermes and ensure the continued focus on delivering excellent investment performance and stewardship for the scheme, in the interests of our members. We look forward to working with Hermes and Federated in the years ahead and wish the business well as it embarks on this next exciting chapter."
Hermes will remain based in London and the deal is expected to conclude in the second half of the year, the companies said, subject to other agreed-upon conditions being met.
Hermes Investment Management chief executive Saker Nusseibeh said the acquisition would expand the company's global reach.
"The power of stewardship, delivered through active engagement with companies, has been an intrinsic belief since Hermes was established 35 years ago," he said. "Through this opportunity, the same Hermes investment and stewardship teams will remain dedicated to our investment philosophies in London, while our products and services gain greater exposure through the network of 8,500 financial intermediaries and institutions that already do business with Federated."
Federated president and chief executive J Christopher Donahue said: "The agreement with BTPS brings to Federated great people, a growing global client base, a history of strong performance, and one of the world's leading active environmental, social and governance (ESG) investment and engagement businesses. This is a growth opportunity for both Federated and Hermes."
Government promises to unleash net-zero investment blitz with '10 Point Plan' for 'Green Industrial Revolution'
Carbon capture, hydrogen, nuclear, electric vehicles (EVs) and renewables all set to benefit from £12bn government stimulus plan, but critics warn funding falls well short of the level required to trigger a green recovery.
Claudia Chapman sets out why schemes should look at expand their stewardship reporting and learn from best practice.
In this live blog, Professional Pensions' sister title Investment Week collates all the breaking market news, analysis and opinion on equity, bond and currency movements as well as the impact of trade wars, tightening monetary policy and the Brexit negotiations....
PensionBee is planning to roll out its fossil fuel-free fund by the end of this year after receiving £31m in fund commitments from customers in under a week.
Brunel Pension Partnership has launched two investment vehicles to target infrastructure assets that meet Paris Agreement objectives for its partner funds.