By Charles Stein, John Gittelsohn and Katherine Chiglinsky
(Bloomberg) --Invesco Ltd. agreed to buy OppenheimerFunds from Massachusetts Mutual Life Insurance Co., adding more actively managed products to the lineup at one of the largest managers of exchange-traded funds.
Invesco will pay about $5.7 billion including $4 billion of preferred shares and 81.9 million of common stock. The common stock is valued at about $1.7 billion, based on Invesco’s closing stock price Wednesday. The preferred shares will pay a fixed rate of 5.9 percent. The transaction is expected to close in the second quarter of 2019.
Invesco, the fourth-largest manager of ETFs, is among firms pushing to get bigger amid growing pressure to reduce fees and gain economies of scale. The deal would increase its assets under management to more than $1.2 trillion while adding high-fee actively managed funds to the mix. In April, Invesco closed a $1.2 billion acquisition of ETFs from Guggenheim Partners. OppenheimerFunds manages more than $246 billion in assets.
Recent efforts by asset managers to grow through mergers haven’t immediately borne fruit. Investors in Janus Henderson Group Plc lost about 17 percent through Wednesday since the May 2017 merger of Janus Capital Group Inc. and Henderson Group Plc. Standard Life Aberdeen Plc fell more than 31 percent since Standard Life Plc acquired Aberdeen Asset Management Plc in August 2017.
Several analysts expressed skepticism about the acquisition’s benefit for Invesco, after it was first reported Sept. 21.
“This seems to be a high price to pay for a scale-driven deal,” Greggory Warren, an analyst with Morningstar Inc., wrote in a Sept. 23 note. Invesco shares are down more than 40 percent this year.
MassMutual Chief Executive Officer Roger Crandall has been reshaping the company’s asset-management operations. In 2016, he combined some units under the Barings brand led by Tom Finke. Barings, which oversaw more than $306 billion as of June 30, has strategies in sectors including private credit, fixed income, equities and real estate.
--With assistance from Matthew Monks.To contact the reporters on this story: Charles Stein in Boston at [email protected] ;John Gittelsohn in Los Angeles at [email protected] ;Katherine Chiglinsky in New York at [email protected] To contact the editors responsible for this story: Michael J. Moore at [email protected]t Margaret Collins, Steve Dickson