Kansas City Southern to Spin Off Financial Services Unit

Updated from 9:40 a.m. EDT

Kansas City Southern Industries (KSU) will spin off its financial services subsidiary, including the popular Janus group of mutual funds, the company announced Thursday.

The plan has been in the making for years, and it has finally gained regulatory approval. The aim is to separate the conglomerate's railroad and financial services businesses into two publicly traded companies, Kansas City Southern said.

"The separation of KCSI's financial services and railroad businesses will realize shareholder value by creating two pure investment opportunities with their resources, management teams and business strategies," Landon Rowland, the chairman and chief executive of the Kansas City, Mo.-based company, said in a statement. "KCSI has a well-established record of achieving attractive returns for shareholders, and this spinoff reflects the board's priority to continue to build value for the company's shareholders."

Kansas City Southern's stock closed up 9 5/16, or 12%, at 86.

The financial services division, called Stilwell Financial, includes Janus Capital, arguably the nation's hottest mutual fund house, as well as two other asset management firms, Berger and Nelson Money Managers. It is expected to begin trading on the New York Stock Exchange under the ticker symbol SV by mid-July.

Guy Moszkowski, an analyst who covers Kansas City Southern for Salomon Smith Barney, said the move would have little impact on Janus, which had six of the top 10 best selling mutual funds through April 30, according to Financial Research, a Boston consulting firm.

Janus management, however, would have preferred to be spun off separately.

"We've always believed that a separate spinoff of Janus would unlock the true value of Janus," said Stephen Stieneker, a spokesman for the company, who added that Janus made the pitch, to no avail, to the board of Kansas City Southern.

More than 90% of Stilwell's earnings come from Janus, Moszkowski said. The key questions for Janus - which will be answered in the coming weeks - will be how much influence it will have in nominating members to Stilwell's board, and how active Stilwell's management will be. Currently, Janus does not have board representation at Stilwell.

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