BT Pension scheme to sell Hermes
April 16, 2018

The BT Pension scheme has announced that it is to sell a majority interest in Hermes Fund Managers Limited, which operates Hermes Investment Management, from BT Pension Scheme (BTPS). The buyer is Federated Investors, regarded as one of the largest investment managers in the United States of America (USA).

Upon closing, Federated will pay £246 million (approximately US$350 million) to BTPS for a 60 percent interest in Hermes. Federated will fund the transaction through a combination of cash and an existing revolving credit facility. BTPS will retain a 29.5 percent share in Hermes and will continue to invest in Hermes' strategies as a client. Certain members of Hermes' management will hold an aggregate 10.5 percent interest in Hermes. 

The agreement has been approved by the boards of Federated and BTPS and is subject to approval of regulatory authorities in the UK, Singapore and other jurisdictions. The transaction also is subject to satisfaction of other agreed-upon conditions, and is expected to be completed during the second half of 2018.

Hermes' headquarters will remain in London, operating as a subsidiary of Federated Investors. Upon completion of the transaction, Hermes will retain its own board, chaired by an independent Non-Executive Chairman, comprising representatives from Federated, BTPS and Hermes' executive leadership, as well as two further independent Non-Executive Directors.

After completion of the transaction, Federated will have the opportunity to purchase and BTPS will have the option to sell additional shares of Hermes from BTPS over the next three to six years pursuant to certain put/call provisions. 

BTPS says that Hermes provides 16 differentiated strategies in high-active share equities, credit and private markets, including real estate, infrastructure and private equity, serving more than 550 clients through wholesale and institutional markets. Hermes also advises $453.7 billion (£336.1 billion) through its Hermes Equity Ownership Services (EOS) division.

"The agreement with BTPS brings to Federated great people, a growing global client base, a history of strong performance and one of the world's leading active ESG (environmental, social and governance) investment and engagement businesses," said J Christopher Donahue, President and Chief Executive Officer of Federated Investors.

"This is a growth opportunity for both Federated and Hermes, with Hermes' range of investment strategies serving as effective complements to Federated's existing strategies in equity, fixed income and cash management. In addition, Hermes' capabilities and client relationships in the UK, the rest of Europe and the Asia Pacific region significantly broaden Federated's distribution capabilities."

Paul Spencer, chair of the BTPS Trustee, said: "Hermes has delivered excellent investment performance and stewardship to the Scheme over many years, operating initially as our in-house manager and in recent years, building on this capability to develop a strong multi-client business. This transaction is the next step in the evolution of Hermes, as it continues to expand its global business.

"In Federated, we have identified a firm with shared values and beliefs that will both help grow Hermes and ensure the continued focus on delivering excellent investment performance and stewardship for the scheme, in the interests of our members. We look forward to working with Hermes and Federated in the years ahead and wish the business well as it embarks on this next exciting chapter." 

The combined organization would have approximately $442.2 billion (£327.6 billion) in assets under management. In the agreement, Federated's lead financial advisor was Citigroup Global Markets, with additional representation from Barclays Capital. BTPS was represented by PwC and Allen and Overy. Hermes was represented by Fenchurch Advisory Partners LLP.





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The BT Pension scheme has announced that it is to sell a majority interest in Hermes Fund Managers Limited, which operates Hermes Investment Management, from BT Pension Scheme (BTPS). The buyer is Federated Investors, regarded as one of the largest investment managers in the United States of America (USA).

Upon closing, Federated will pay £246 million (approximately US$350 million) to BTPS for a 60 percent interest in Hermes. Federated will fund the transaction through a combination of cash and an existing revolving credit facility. BTPS will retain a 29.5 percent share in Hermes and will continue to invest in Hermes' strategies as a client. Certain members of Hermes' management will hold an aggregate 10.5 percent interest in Hermes. 

The agreement has been approved by the boards of Federated and BTPS and is subject to approval of regulatory authorities in the UK, Singapore and other jurisdictions. The transaction also is subject to satisfaction of other agreed-upon conditions, and is expected to be completed during the second half of 2018.

Hermes' headquarters will remain in London, operating as a subsidiary of Federated Investors. Upon completion of the transaction, Hermes will retain its own board, chaired by an independent Non-Executive Chairman, comprising representatives from Federated, BTPS and Hermes' executive leadership, as well as two further independent Non-Executive Directors.

After completion of the transaction, Federated will have the opportunity to purchase and BTPS will have the option to sell additional shares of Hermes from BTPS over the next three to six years pursuant to certain put/call provisions. 

BTPS says that Hermes provides 16 differentiated strategies in high-active share equities, credit and private markets, including real estate, infrastructure and private equity, serving more than 550 clients through wholesale and institutional markets. Hermes also advises $453.7 billion (£336.1 billion) through its Hermes Equity Ownership Services (EOS) division.

"The agreement with BTPS brings to Federated great people, a growing global client base, a history of strong performance and one of the world's leading active ESG (environmental, social and governance) investment and engagement businesses," said J Christopher Donahue, President and Chief Executive Officer of Federated Investors.

"This is a growth opportunity for both Federated and Hermes, with Hermes' range of investment strategies serving as effective complements to Federated's existing strategies in equity, fixed income and cash management. In addition, Hermes' capabilities and client relationships in the UK, the rest of Europe and the Asia Pacific region significantly broaden Federated's distribution capabilities."

Paul Spencer, chair of the BTPS Trustee, said: "Hermes has delivered excellent investment performance and stewardship to the Scheme over many years, operating initially as our in-house manager and in recent years, building on this capability to develop a strong multi-client business. This transaction is the next step in the evolution of Hermes, as it continues to expand its global business.

"In Federated, we have identified a firm with shared values and beliefs that will both help grow Hermes and ensure the continued focus on delivering excellent investment performance and stewardship for the scheme, in the interests of our members. We look forward to working with Hermes and Federated in the years ahead and wish the business well as it embarks on this next exciting chapter." 

The combined organization would have approximately $442.2 billion (£327.6 billion) in assets under management. In the agreement, Federated's lead financial advisor was Citigroup Global Markets, with additional representation from Barclays Capital. BTPS was represented by PwC and Allen and Overy. Hermes was represented by Fenchurch Advisory Partners LLP.



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