In a sign of ongoing strategic purchases and deal-making, Invesco and MassMutual announced Oct. 18 that the firms have entered into an agreement whereby Invesco will acquire MassMutual asset management affiliate OppenheimerFunds, Inc. — a combination that will result in one of the largest global asset managers.
The transaction will bring Invesco’s total AUM to more than $1.2 trillion, making it the 13th largest global investment manager and 6th largest U.S. retail investment manager, according to the announcement.
MassMutual acquired OppenheimerFunds in 1990 for $150 million. Since that time, OppenheimerFunds’ AUM have grown from $14 billion and approximately 1.2 million shareholder accounts, to more than $246 billion and over 13 million shareholder accounts, as of Sept. 30, 2018.
Under the terms of the agreement, Invesco will acquire OppenheimerFunds with consideration to MassMutual and OppenheimerFunds employee shareholders consisting of 81.9 million shares of Invesco common equity and $4 billion in perpetual, non-cumulative preferred shares with a 21-year non-call period and a fixed rate of 5.9%.
The 81.9 million shares include approximately 6.6 million shares to be issued as a part of the post-closing conversion of unvested restricted stock awards, currently held by OppenheimerFunds employee shareholders, into Invesco restricted stock awards.
As a result, MassMutual is expected to own an approximate 15.5% stake in the common equity of Invesco, becoming Invesco’s largest shareholder, the announcement explained.
The transaction is expected to be significantly accretive to Invesco's earnings per share with ~18% accretion for the three quarters in 2019 and ~27% accretion in 2020. Additionally, as part of an ongoing partnership between Invesco and MassMutual, the companies said they will explore future strategic collaboration opportunities.
The announcement suggests that clients of Invesco and OppenheimerFunds will benefit from the resulting combination, which will incorporate OppenheimerFunds’ investment capabilities, including its international and emerging markets equity franchise, and its U.S. third-party distribution platform, with Invesco’s diversified product lineup and global presence.
“This is a compelling, highly strategic and accretive transaction for Invesco that will help us achieve a number of objectives: enhance our leadership in the U.S. and global markets, deliver the outcomes clients seek, broaden our relevance among top clients, deliver strong financial results and continue attracting the best talent in the industry,” notes Martin Flanagan, President and CEO of Invesco.
The transaction is expected to close in the second quarter of 2019, pending necessary regulatory and other third-party approvals.
