Janus' InTech Deal Shows the Value of a Clean Name
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Friday, February 03, 2006

Janus' InTech Deal Shows the Value of a Clean Name

Janus Capital group has increased its holding in its Intech subsidiary, raising a big question: Is Intech overpriced, or are Janus' shares marked down too far?

The purchase raises Janusí stake in the Palm Beach Gardens, Florida-headquartered firm to about 83 percent from 78 percent.

Explaining the deal, Janus CEO Gary Black told shareholders that his move to increase Janus' stake in Intech "reflects Janus' commitment to being a premier player in a mathematically driven risk-managed investment strategies."

A more interesting point is what Janus paid for upping its stake in a firm it already controls. A regulatory filing dated February 2, showed that the Denver-based firm paid $90 million to boost its stake by 5 percent. At that price, Janus is valuing Intech at $1.8 billion, or about 42 percent of Janus' own $4.5 billion market value.

Translated into traditional bankers' metrics for the industry, Janus is worth 3.03 percent of AUM while Intech is worth 4.02 percent of assets, a figure roughly in line with the price paid for other asset managers in recent deals.

What makes Intech so valuable? For one, it is a value and quant shop far removed from Janus' concentrated momentum investing roots. It provides risk-managed investment products centered on a mathematical theory that seeks to capitalize on the fluctuations in stock price movements.

Intech also manages a significant pot of cash (about $44.7 billion) that is growing quickly. The firm has added $37 billion in assets under management since 2002.

Finally, Intech has something that Janus can never have again -- a clean brand. In this age of google searches Janus will be forever known to investors with a computer and Web access as one of the firm's that settled with Eliot Spitzer. That, more than anything else, likely explains the difference in prices.

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