Man Group plans £2bn spin-off

By TOM MCGHIE
Updated:

 

THE giant Man Group, which manages £25 bn for the world's super-rich, is weighing up splitting off its brokerage arm in a move that could create a £2bn FTSE 100 business.

The demerger would be the biggest in the City for years and follows splits such as BT and O2, and Kingfisher and Woolworths.

Man Group, best-known for its hedge fund activities, believes its brokerage business is being overlooked and would be worth far more as a separate company.

Bosses have been inspired by the $3.5bn (£1.95bn) flotation last week of Refco, a similar-sized New York-based brokerage.

The dramatic growth of the £5bn Man Group, which sponsors the Man Booker book prize, has concentrated shareholders and analysts' minds on the soaraway performance of the group's investment funds.

But unnoticed, Man Financial has transformed itself into one of the world's biggest brokers in futures and options, which allow investors to gamble on rises and falls in markets and commodities. It employs about 1,200 people in eight offices around the world, including New York, Chicago, Paris and Hong Kong.

The architect of its success is chief executive Stanley Fink, 47, who joined 18 years ago. Educated at Cambridge and trained in accountancy at Arthur Andersen, Fink has transformed Man from a sleepy sugar trading company into a hedge fund. He bought shares in the company when they were 18p. With the price now 1674p, his 1.51% holding is worth £78m.

Executives are understood to be considering a detailed demerger plan, but advisers have not yet been appointed. Investors would swap their shares in Man for shares in two separate businesses, just as BT Group shareholders recently saw their shares split into BT and O2.

The trigger for the Man demerger was the extraordinary valuations of the deal involving Refco, which made a profit last year of £97m on turnover of £722m.

By comparison, Man Financial made a profit of £80.5m last year, up 21% on the previous year. The company makes 17% of the group's total profits of £436m.

Man Group's heritage can be traced to a company set up in 1738 by barrel-makers Edward Desborough and Frederick Man, who supplied rum to the Royal Navy.

Over the next 250 years, ED&F Man became one of the world's biggest commodities groups, specialising in sugar, coffee and cocoa.

As a sideline, it traded on financial markets as a way of hedging its bets in case crops failed or commodity prices fell. The financial markets business became the origin of Man's hedge fund operation.

When the company gave up its status as one of Britain's biggest private companies and floated in 1994, financial services made up 40% of the business. Today, Man is entirely a financial services firm.

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