John Duffield's New Star finally imploded today with the stricken fund manager forced to sell up for just £5 million — or tuppence a share.

At its height, Duffield's New Star Asset Management was worth almost £1.5 billion, and appeared to be another raging success for one of the best-known — and most abrasive — fund managers of his generation. He has claimed to have made millionaires of 250 of his staff during his career.

But New Star's decision in 2007 to take on debt so it could make huge payouts to staff ultimately hobbled the firm as it failed to cope with the collapse of financial markets leading to today's rescue by rival fund manager Henderson. It is paying £5.4 million for New Star's ordinary shares and putting up £110 million to pay the firm's lenders.

It is an ignominious end for Duffield, who founded New Star eight years ago, having made his first fortune creating Jupiter Asset Management and subsequently selling it to Commerzbank, with whom he inevitably and spectacularly fell out.

In New Star, Henderson is buying a business whose funds under management have halved to £10 billion in a matter of months as investments crashed and investors headed for the door.

However, Henderson's chief executive of less than six months, Andrew Formica, is convinced he has got a bargain.

“Very rarely will you find an opportunity to significantly enhance your strategic position at compelling financial terms,” he added. “You have to see this as an acquisition of talent while at the same time acquiring a book of assets at a very attractive price.”

Henderson says it will become the UK's fifth-largest retailer of savings funds to the British public after Invesco Perpetual, Fidelity, Standard Life and Legal & General — and larger than Schroders, which is reckoned to have been outmanoeuvred in the bidding to buy New Star.

Neither Duffield nor his chief executive, Howard Covington, will be joining the enlarged firm, but Henderson hopes New Star's hitherto highly regarded constellation of senior stock-pickers such as Richard Pease and Rupert Ruvigny will stay.

There is speculation that as many as half of New Star's 300 staffers will be made redundant.