Man Group said it was in talks to buy U.S. asset manager Numeric Holdings and diversify its quantitative fund offering, giving the UK hedge fund manager's share price a boost.
A deal for Boston-based Numeric, part-owned by private equity group TA Associates and up for sale since early 2013, would broaden a quant fund stable currently focused on Man's flagship AHL computer-driven funds.
It would also boost its presence in the United States, the biggest hedge fund market in the world, as well as its foothold in the institutional market, dealing with clients such as pension funds, which are driving growth in the broader industry.
"This transaction would further diversify Man away from AHL and is consistent with Man's strategy to acquire a US-based asset manager," said RBC Capital Markets analyst Peter Lenardos.
"However, given the extremely limited information available, especially on profitability and price - we reserve judgment until more details emerge."
Man, which manages more than $55 billion in assets, has restructured extensively after being hit by poor performance and heavy outflows of client funds during the financial crisis, after which it bought fund of fund and advisory group FRM and alternative asset manager GLG. Phil Dobbin, analyst at Espirito Santo Investment Bank, which acts as market maker for Man and has a "sell" rating on the stock, said using Man's assets under management to market capitalisation as a guide, Numeric could be worth $430 million.
"But we don't have profitability figures for Numeric and have to remember Man has always traded at a high market cap to AuM (assets under management)," he said in a note to clients, adding that such a valuation of Numeric would require Man to use up its surplus capital.
Shares in Man recovered from a quiet start to rise 3 percent by 0740 GMT and lead gainers across the FTSE mid-cap index.
In a statement on Thursday, Man said discussions with Numeric, founded in 1989, with 74 employees and which manages more than $13.9 billion in assets, were ongoing and may or may not lead to a transaction. It declined to comment further.
Quantitative trading strategies use computer-based algorithms to determine when to buy and sell an asset.
(Reporting by Simon Jessop; editing by Huw Jones and John Stonestreet)