According to announcement Thursday by Ashmore, the firm will initially pay $96 million in cash and about $30 million in new shares. If certain financial targets are met, Ashmore would pay up to an additional $120 million for a total of $246 million.
Ashmore, which separately announced its half-year financial update, has $46.7 billion in assets under management, mostly invested in emerging markets debt. EMM reported $10.4 billion in assets under management as of Jan. 31. If completed, the deal would shift Ashmore’s heavy reliance on emerging markets debt to include about 20% in emerging markets equities, according to the announcement.
“This transaction represents an attractive and logical step in Ashmore’s broader strategy to grow and develop the Ashmore brand and to further diversify Ashmore’s revenue streams,” Mark Coombs, Ashmore CEO, said in the announcement. “More specifically, it is consistent with our strategy to grow our equity investment theme.”
David McCann, an analyst covering Ashmore at Numis Securities, said the terms of the transaction “generally (do) stack up well.”
“Ashmore hasn’t overpaid, and both firms appear to be a good fit,” Mr. McCann said in an interview. “It’s a sensible deal.”
However, the announced transaction came at a time when volatility is rising in emerging markets in general, partly driven by concerns about inflation and more recently by the political turmoil in the Middle East. “Ashmore is very exposed to the ebbs and flows of investors’ sentiment in emerging markets as an asset class,” Mr. McCann added.
Pending regulatory approval, the acquisition of EMM is expected to close by the end of May.
Ashmore shares fell by 2.65% to £3.34 ($5.38) at closing Thursday in London.
Separately, Ashmore’s reported that assets under management increased by 32%, or by $11.4 billion, in the six months ended Dec. 31, due to inflows and investment returns. In the year ended Dec. 31, assets under management rose by 48%.
Pretax profits increased by 14% to £127.6 million in the six months ended Dec. 31 compared with the same six months a year earlier, when pretax profits totaled £112.4 million. Management fees were also up by 31% to £116.1 million in the half-year ended Dec. 31 compared with the same six months in 2009. The firm’s operating margin remained at 72% in the same six-month period ended Dec. 31 compared to the previous year.