ow that the Janus
executives in Denver have displaced the Stilwell executives from Kansas City at the helm, is the fund firm is in for more turbulence. A report over the weekend in Barron's
posits that the fund firm may be takeover bait based on its low stock price.
While Janus may look like a broken firm with prima donna investment professionals and a dwindling asset base to those inside the industry, the price may be right. At its current share price, the market values Janus at just 2 percent of assets. That is roughly half the price paid in takeovers of asset managers in recent years. Even Skandia's U.S. business sold for 4.92 percent of assets, although that deal was driven by the insurer's distribution capabilities, an asset that Janus lacks.
One potential buyer, according to the paper is Franklin Resources. In that case, Franklin would be able to add a growth capability to its strong value franchise, Barron's says.
The article notes that Janus' new management is taking aim at the relatively high level of compensation for the firm's investment professionals. A not-so-friendly shareholder that Janus acquired last fall encourages that move. Highfields Capital
, a Boston-based vulture investor, has targeted Janus with its attentions. Highfields has purchased 8 percent of Janus' shares and is encouraging the planned reduction in investment professional pay. It is also opposing Janus' plans to sell its one-third stake in DST Systems.
Highfields is especially concerned that the sale of its stake in DST (estimated to be worth $1.4 billion) would create a sky-high tax bill. Janus' cost basis for the back office firm is close to zero.
The potential carrot for takeover wannabees, says Barron's, is the firm's $13 share price. That is down 75 percent from its peak of 54 in September 2000. The share price reflects the firms dwindling earnings, which are down to 96 cents a share in 2002 from $2.67 in 2000. The market expects Janus to earn 75 cents a share in 2003, according to the paper. Meanwhile, assets under management have fallen by more than half to $146 billion at the end of November from a $318 billion in September 2000.
Even with the dismal performance in 2002, pay at Janus ballooned by roughly $25 million in 2002, to $345 million or $250,000 per employee, according to Barron's. The rise in pay, one of the most substantial costs at any fund firm, narrowed Janus' margins to roughly 20 percent.
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