Man Group buys US-based Numeric Holdings

British hedge fund Man Group'sacquisition of Boston-based Numeric is expected to boost profits by up to 22% and speed diversification away from the former's declining AHL fund.

The acquisition of Numeric, which has $14.7 billion (£8.63 billion) of assets under management and is owned by private equity group TA Associates, will cost Man Group an initial $219 million and a total $275 million when the deal is finalised.

Numeric's management will keep an 18.3% stake but Man Group will have the rights to buy them out in five years.

Although the deal is expected to be profitable for Man Group, Numis analyst David McCann retained a 'sell' on the group saying that the deal would not affect his valuation.

He estimated the transaction will be 16% accretive "relative to our existing full-year 2015 management fee profit before tax forecast" and boost total profit before tax by 22%, assuming Numeric replicates its full year 2013 performance fee level.

"Whilst this is clearly a profit before tax/earnings per share accretive transaction - since it is being funded from cash which has only a de minimis profit before tax impact given low interest rates - surplus capital will reduce by c.$325 million," said McCann.

"This is considered to be a 'fair and reasonable' valuation given the reduction in surplus capital."

McCann expected the purchase of Numeric to aid Man Group in reducing its reliance on declining AHL fund business, which has suffered from weak performance and investor outflows in recent years.

"We do note [the acquisition] will help diversify the group's earnings away from the structurally declining AHL business, which we regard as a positive step, albeit reduce the strength of the balance sheet," said McCann.