Stilwell to Consolidate as Janus
Tue Sep 3,11:54 AM ET
By Martha Graybow and Cal Mankowski
NEW YORK (Reuters) - Stilwell Financial Inc. on Tuesday said it will combine its operations under the banner of its flagship Janus Capital Management mutual fund unit, and tapped a long-time Janus insider to head the merged firm.
The moves come as the company tries to boost the flagging Janus funds, which have plunged during the stock market downturn after soaring during the 1990s boom. The new management structure resolves speculation about the future leadership of Janus, whose founder and former Chief Executive Tom Bailey stepped down on July 1 -- with no obvious successor in place.
The combined company will be led by Mark Whiston, 41, who will become CEO on Dec. 31, when the combination is completed. Whiston currently serves as president of retail and institutional services. He has worked at Janus for 11 years.
The combined company will shut down its headquarters in Kansas City and move its headquarters to Janus' hometown of Denver, resulting in the elimination of 130 to 140 jobs. Stilwell also owns the Denver-based Berger Financial Group, another fund firm hit hard by the market downturn as its growth-oriented stock funds have fallen.
Stilwell shares rose 39 cents, or 2.8 percent, to $14.33 in Tuesday's late morning trading. The stock is down about 47 percent from its 52-week highs, battered by the stock downturn and sharp declines in Stilwell's profits.
Landon Rowland, Stilwell's chairman, president, and CEO, will serve as non-executive chairman of the board until Jan. 1, 2004. He will continue as a director for one year after that. It is expected that Whiston will be appointed chairman on Jan. 1, 2004.
"Through this transaction, we will create a stronger, more efficient organization that will begin to unlock the potential value of our stockholders' investments," Rowland said in a statement. "Our holding company structure will no longer be necessary, and we will be able to eliminate redundant expenses."
Stilwell owns about 92 percent of Janus.
CHALLENGES AHEAD
The changes surprised some industry observers, who said they had thought Stilwell would look outside the company for a successor to Bailey.
The appointment of Whiston, who has a sales and marketing background, represents a departure for Janus, which had been led for years by Bailey, who came from the investment side of the business, said mutual fund consultant Burt Greenwald.
Stilwell said it expects the consolidation to result in the elimination of about $40 million of redundant expenses, such as salaries, facilities, and back office operations. The company will book a one-time, third-quarter charge of about $36 million for severance and other costs.
"Janus for years has been trying to get a spinoff of the pure Janus organization," Greenwald said. "The new organization seems to recognize that the brand name Janus has a much more powerful impact on the marketplace."
Whiston faces a big challenge. Many investors are cashing out of the portfolios after the Janus funds have posted losses. Millions of investors had poured into the funds during the late 1990s Internet boom, when big bets on large technology stocks made Janus one of the most popular fund companies.
Janus' stock funds are down 20.6 percent on average year to date through the end of July, compared with a 17.3 percent decline for average stock fund at No. 1 fund firm Fidelity Investments, according to fund researcher Lipper Inc.
OTHER CHANGES
Helen Young Hayes, Janus's managing director of investments, and Jim Craig, former chief investment officer of Janus, will join Janus' board by Jan. 1, 2003. Three new independent members are expected to be appointed to the board by Dec. 31, 2002, replacing three current directors who plan to retire.
When the consolidation is completed, Janus will be responsible for the strategic direction of the company's investment management subsidiaries which include Janus Capital Management, Berger Financial, which owns Enhanced Investment Technologies (INTECH), Bay Isle Financial and U.K.-based Nelson Money managers Plc.
Together, the firms manage about $150 billion in assets, including about $135 billion managed by Janus.
Janus will also have a 33 percent ownership of DST Systems Inc. and 81 percent ownership of Nelson.
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