Invesco Buys OppenheimerFunds

October 19, 2018

On Thursday, Oct. 18, Invesco and Massachusetts Mutual Life Insurance Company (MassMutual) jointly announced that Invesco would acquire MassMutual's affiliate OppenheimerFunds, finalizing a deal rumored to be in the works for weeks.

In exchange, MassMutual and OppenheimerFunds employees will receive 81.9 million shares of common Invesco stock and $4 billion in preferred shares, while MassMutual would gain a 15.5% stake in Invesco, becoming the bank's largest single shareholder. In addition, the retired CEO of OppenheimerFunds will be nominated to serve on Invesco's board of directors.

According to the press release announcing the acquisition, Invesco's total assets under management (AUM) will now top $1.2 trillion, making it the sixth-largest retail investment manager in the U.S. and the 13th-largest worldwide.

The transaction is expected to be complete in Q2 2019, pending regulatory and third-party approvals.

2 ETF Issuers: 1 Big, 1 Small

Invesco is currently the fourth-largest ETF issuer, with a combined $190 billion in across its 249 ETFs. It had purchased the PowerShares family of ETFs back in 2006 and, earlier this year, transitioned away from the brand (read: "Invesco Eliminating PowerShares Brand").

OppenheimerFunds, an active asset management firm with $240 billion in AUM, has been an affiliate of MassMutual for 28 years. It too offers its own line of ETFs, though it remains a much smaller player in the industry than Invesco. To date, the firm's 20 smart-beta ETFs have gathered $3.2 billion in AUM.

Where Oppenheimer made its mark in the ETF world was with its revenue-weighted approach to smart-beta investing, in which equity markets are weighted according to company revenue instead of market capitalization.

The largest of these funds include the $1 billion Oppenheimer S&P Ultra Dividend Revenue ETF (RDIV) and the $1 billion Oppenheimer S&P 500 Revenue ETF (RWL) (read: "Embracing Multiple Facets Of Smart Beta").

"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," said Martin Flanagan, president and CEO of Invesco, in the release.

The deal is also expected to add to Invesco's earnings per share significantly, with an expected 18% for 2019, and 27% for 2020.

Invesco On Buying Spree

"The asset management business is increasingly becoming a scale game with demand for lower-cost passive and active products," said Todd Rosenbluth, director of ETF and mutual fund research for CFRA, in an email statement earlier today. "BlackRock, Fidelity and Vanguard are competitive, making it a challenge for others."

Apparently, Invesco plans to meet that challenge with a swath of acquisitions. Last August, the firm acquired Source, a European ETF specialist. A month later, it purchased Guggenheim's ETF business for $1.2 billion (read: "Invesco Acquires Guggenheim ETFs For $1.2B").

Through these deals, Invesco has steadily built out its ETF presence in international and emerging market equities, as well as continued to build on its foundation in alternatively weighted products.

"CFRA sees the planned acquisition of OppenheimerFunds adding an impressively performing emerging market lineup with a growing smart-beta universe,” said Rosenbluth.

Contact Lara Crigger at [email protected]

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