Miton’s merger with Premier leaves the boutique manager less vulnerable to concentration risk that left it wounded in 2016 when George Godber and Georgina Hamilton exited the business.
Miton has rallied 25% on news of the merger, which will see the combined £11.5bn fund house rebranded as Premier Miton.
Premier boss Mike O’Shea is set to become chief executive of the merged entity, while Miton CEO David Barron will become a non-executive director.
The merger is being described as a “done deal” with Artemis and Axa Investment Managers, the largest institutional shareholders with 17% combined, producing letters of intent to vote in favour.
Key manager risk
Miton had come out among the asset managers most vulnerable to concentration risk with multi-cap managers Gervais Williams and Martin Turner responsible for 42.4% of assets, according to a Peel Hunt report published in July.
The Miton UK Multi-Cap Income fund the duo managed held 28.9% of the firm’s AUM at the time.
“The merger does reduce the reliance on Gervais Williams in the enlarged group which will be a positive for Miton having suffered from significant key man risk a couple of years ago with George Godber and Georgina Hamilton,” said AJ Bell head of active portfolios Ryan Hughes. Miton’s share price sunk 28% to 25p when Godber and Hamilton jumped ship to Polar Capital.
Premier also ranked highly for concentration risk, albeit with a team, with its multi-asset team accounting for 59% of AUM and its Multi Asset Distribution fund accounting for 20.1%, according to the report.
Peel Hunt said the deal brings “welcome diversification” while a Finncap note said “the key man risk is now mitigated”.
Premier/Miton versus Liontrust/Neptune
The merger comes two months after Liontrust confirmed it was acquiring Neptune for £40m bringing on £2.8bn to take total AUM to £17bn.
Willis Owen head of personal investing Adrian Lowcock said Neptune had “lost momentum and was struggling to make the next step up”.
In contrast, Miton profits before tax were up 34% in its last financial year to £9.2m with average AUM at £4.4bn, a 30% increase on £3.4bn in 2017. However, its merger value of 51.84p per share, plus a special dividend of 4.9p, is still well below the 75.94p price tag at the start of October just before global equity markets sold off.
Lowcock said the Premier/Miton merger was another example of mid and smaller-sized fund managers looking to achieve the scale necessary to compete in fund management.
Restructuring costs are set to be £10m over three years.
Favoured funds at Miton and Premier
Premier is strong in multi-asset with an established position among the adviser community, said Chelsea Financial Services managing director Darius McDermott. In contrast, Miton is strong in single strategies.
Chelsea Financial Services has just added Miton European Opportunities to its core buy list while the US Opportunities fund already features. It also likes Premier Global Listed Infrastructure, said McDermott.
Among Premier’s multi-asset suite, Fundcalibre recommends Income, Income and Growth and Diversified Growth.
Willis Owen has the same Premier multi-asset funds on its buy list, while AJ Bell currently doesn’t have any Miton or Premier funds in its favoured funds list or within its active portfolios.
Hughes said David Jane and his team at Miton are also well regarded in multi-asset, although unlike the multi-manager approach at Premier, he invests directly in stocks and bonds. “There may be room for both flavours of multi-asset, albeit they will need to think carefully about the clarity of the proposition,” he said.
