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Federated Investors to Acquire Majority Interest in UK Integrated ESG Manager Hermes Investment Management from BT Pension Scheme
Monday 16 April 2018

16 April 2018 - US-based investment manager Federated Investors, Inc. (NYSE: FII) has agreed to acquire a majority interest in UK-based ESG investment specialist Hermes Fund Managers Ltd., which operates Hermes Investment Management, from UK-based pension scheme BT Pension Scheme, the company said.

Upon closing, Federated will pay GBP 246m (approximately USD 350m) to BTPS for a 60% 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 % 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% 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.

This 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, Inc.

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.

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 USD 453.7bn (GBP 336.1bn) through its Hermes Equity Ownership Services division.

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

BT Pension Scheme is one of the UK's largest corporate defined benefit pension schemes with assets of over GBP 49.3bn (as of 30 June 2017) and 297,454 scheme members.

This press release is issued and approved by BT Pension Scheme Ltd. of 1 America Square, 17 Crosswall, London EC3N 2LB.

This document is not an offer to sell or an invitation to apply for any product or service of BTPSM Ltd.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing USD 397.6bn in assets as of Dec. 31, 2017.
Date Published: 16/04/2018
Target: Hermes Fund Managers/ Hermes Investment Management
Country: UK
Deal Size: 350m (USD)
Sector: Banking/Financial Services
Type: LBO
Financing: Cash
Status: Agreed
Vendor: BT Pension Scheme
Buyer: Federated Investors