Rather than capital management as some investors might have hoped for, Macquarie Group will spend $US1.7 ($A2.3 billion) in cash on buying American funds management company, Waddell & Reed Financial.
The purchase price is a generous 48% to the value of the target (based on the last price).
In buying Waddell &Reed, Macquarie will add around $US68 billion in managed investments to its fund’s management business. That will see the total rise to over $US465 billion ($A650 billion).
The deal is the company’s first large acquisition under new Macquarie Chief Executive Officer Shemara Wikramanayake, who previously led the asset management unit that is making the acquisition.
Shares of Waddell & Reed soared 47% in after-hours trading on Thursday. The offer price of $US25 per share is 48% above Waddell & Reed’s closing price (before the after-hours surge).
Shares in Macquarie edged up 0.17% at $138.58 as investors assessed the planned takeover.
According to Reuters, analysts at Morgan Stanley say Waddell has seen net outflows of up to 14% assets under management in the past three years and faces structural risks given about 60% of its $68 billion in assets under management is distributed via its own retail broker network and has higher fees.
Macquarie moved into the US in 2009 purchase of Delaware Investments in which marked the company’s shift into asset management outside Australia.
The Waddell deal is expected to complete in the middle of 2021 and will make Macquarie as a top-25 actively managed mutual fund manager in the US.
After the deal closes, Macquarie will sell Waddell & Reed’s wealth management platform to US investment advisory retail network LPL Financial Holdings for $300 million, and enter into a partnership with the firm. That will see LPL become a major partner with Macquarie in the US funds management business.