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Magellan Financial Group (ASX: MFG) has lifted its underlying first-half profit by 25 per cent to $109.2 million after it completed two major acquisitions.
The specialist funds management business picked up Airlie Funds Management and Frontier Partners Group as it looks to diversify its retail management business in Australia along with adding to its institutional distribution in North America.
The two companies cost Magellan around $19 million in cash and approximately 4.5 million Magellan shares.
Airlie Funds Management is a specialist Australian equities fund manager with over $6 billion of funds under management.
Magellan and Airlie plan to launch the 'Airlie Industrial Share Fund'.
"The acquisition brings together two of Australia's leading funds management businesses," says Magellan co-founder Hamish Douglass.
"The proposed launch of the Airlie Industrial Share Fund highlights the potential power of the combination of Airlie and Magellan.
"The Airlie Industrial Share Fund will leverage Airlie's pre-eminent expertise in Australian equities and Magellan's operational expertise and distribution strength in the retail and adviser market."
Magellan will acquire 100 per cent of Airlie through the issue of shares in Magellan to Airlie's shareholders at the completion of the acquisition, expected by February 28, 2018.
Frontier Partners Group has been Magellan's distribution partner in North America for seven years, since 2011.
Douglass says the acquisition of Frontier is a natural evolution of the relationship between the two companies.
"The partnership with Frontier and Billy Forsyth (founder of Frontier) has been a real success story for Magellan, representing $12.8 billion of funds under management," says Douglass.
"The acquisition represents a natural evolution of our relationship with Frontier."
Bill Forsyth has agreed to become the executive chairman of Magellan's business in North America as part of the acquisition process.
The acquisition of Frontier will be funded using internal cash and the issue of Magellan shares. The acquisition was completed on 5 February 2018.
Magellan's net profit fell 38.6 per cent to $53.6 million because of costs associates with the ASX float of Magellan Global Trust.
Shares in Magellan are down 7.36 per cent to $24.98 per share at 10.40am AEDT.
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