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Thursday, January 18, 2018|
Franklin's Nine-Figure Deal Across the Pond Brings Back a Templeton Vet
Thanks to a deal with a price tag rumored to be in the low nine figures, Franklin Templeton [profile] is bringing a Templeton veteran back into the fold, along with his shop.
Yesterday Jenny Johnson, president and chief operating officer of Franklin Resources, confirmed that the San Mateo, California-based mutual fund firm has agreed to buy Edinburgh, Scotland-based Edinburgh Partners Limited, which has $10.3 billion in AUM and 12 investment professionals with a focus on absolute return global equity strategies for institutional clients. Though the pricing and terms of the deal were not disclosed, Jefferies analyst estimates that Franklin will pay between $175 million and $225 million, while Credit Suisse analyst Craig Siegenthaler pegs the price at between $115 million and $195 million.
At the low end of those ranges, a $115-million price tag would translate into 1.12 percent of Edinburgh Partners' AUM. At the high end, a $225-million price tag would translate into 2.18 percent of its AUM. The deal is expected to close in the first half of 2018 and follows the planned retirement of famed emerging markets PM Mark Mobius, who is expected to depart at the end of January. Jefferies' Fannon expects "additional M&A is still on the horizon" for Franklin.
Sandy Nairn, CEO of Edinburgh Partners, founded the institutional asset manager in 2003 after several years with the Scottish Widows Investment Partnership and ten years with the Templeton Global Equity Group alongside the late John Templeton. As part of the deal, Nairn will remain CEO of Edinburgh Partners while also becoming chairman of the Templeton Global Equity Group, reporting to Franklin Templeton equities chief Stephen Dover. The Templeton Global Equity Group has 39 investment professionals and more than $101 billion in AUM as of December 31.
Johnson praises Nairn for his "tremendous amount of leadership experience and expertise in managing global and international equities." Dover calls Nairn's team "an excellent addition to [Franklin's] global equity capabilities."
Though based in Scotland, Edinburgh Partners has U.S. offices in West Palm Beach, Florida and in Walnut Creek, California. (It also has a London office.) Edinburgh Partners does subadvisory work on this side of the Atlantic; Jefferies' Fannon notes that the shop subadvises a slice of the Vanguard International Value Fund.
Both Credit Suisse's Siegenthaler and Jefferies' Fannon see the deal as being too small (Franklin has $753 billion in worldwide AUM) to have a big short-term impact on flows or earnings at Franklin. Yet they expect the returning Nairn to be a good leadership fit within Franklin, and they like that Edinburgh Partners specialization focuses mostly on institutional business (which is higher margin).
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