(Bloomberg Opinion) — Nelson Peltz has blinked, sweetening his bid for Janus Henderson Group Plc to a “best and final” $8 billion. The billionaire activist investor can be pushed around a little bit. That may have to suffice for Janus’ shareholders as the path to a better price from here has narrowed.
There was no strict need for Peltz’s Trian Fund Management LP to lift its bid for the London-based asset manager to $52 from $49 per share. Trian and Janus had a firm deal. Janus had argued that a higher cash-and-stock proposal from Victory Capital Holdings Inc. was full of holes and couldn’t actually be delivered.
But the market knew Peltz had not reached his pain barrier. Moreover, there was the possibility that Victory could fix the flaws in its counterbid. With merger arbitrageurs pushing the Janus stock price above Trian’s offer, the deal risked facing a knife-edge vote when put to the target company’s shareholders. Trian has sensibly taken preemptive action. Peltz has had his eye on this company since 2020. He clearly intends to finish what he started.
The new offer clears a symbolic $50-a-share hurdle. Its 25% takeover premium is comparable to other asset-management deals, and it looks pretty fair given Trian already has a 21% stake. Bidders don’t usually pay up when they already have a large holding. The price also comfortably tops analysts’ average 12-month target for Janus stock before the offer emerged.
Can Victory dislodge Peltz now? Its proposal was worth nearly $57 per Janus share based on Victory’s share price Monday. But the interloper needs to address a long laundry list of problems set out by the Janus committee responsible for weighing the takeover offers.
Being the smaller party, Victory would have to pile heaps of debt onto the combined company to fund the $40-a-share cash element of its bid. Janus shareholders would get a minority stake in the Victory-Janus mash-up and the resulting indebtedness could weigh on its stock-market value. Clients might veto the deal, worried about the impact of the suitor’s $500 million of proposed cost cuts. Talent could walk. Janus’ objections go on and on.
Does the target protest too much? Victory could — in theory — address the worry about debt by roping in financial support from a partner, or perhaps even garnering support from its own strategic investor, French fund manager Amundi SA. That said, it’s surprising it hasn’t found a teammate so far.
As for employees and client flight, Victory would have to come up with a credible retention package for key staff. Providers of debt financing are likely to want a high degree of certainty that the business won’t lose its customers.
Some bid rejections strike a deft balance between being strongly worded and laying out a pragmatic set of remedies that the spurned suitor can adopt to win the day. Janus’ tone is so tough that its list of objections doesn’t sound much like a coded come-on to Victory to have another go. For example: “The definition of insanity is doing the same thing over and over again and expecting different results. After six separate discussions, there is no escaping the reality: The Victory proposal is not and will never be actionable.” And that was in bold font, marginally less aggressive than shouty capitals.
Stripping out the angry rhetoric, Janus’ criticism could still be translated as telling Victory to come back with a proposal that contains more substantial changes to its approach than it’s made so far.
When “best and final” offers are made in the US, the devil is in the detail. But you can see why the market is wary of pushing Janus’ stock much above the new offer price. The hedge fund merger arbs who buy into bid targets have gotten some financial gain, especially those who jumped in early. But the situation is not quite over just yet.
This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Opinion columnist covering deals. Previously, he worked for Reuters Breakingviews, the Financial Times and the Independent newspaper.
