Exchange-traded fund upstart PowerShares Capital Management is relinquishing power.
London-based asset manager
announced plans Monday to buy PowerShares for $60 million in cash, plus subsequent contingent payments.
Wheaton, Ill.-based PowerShares is the fifth-largest ETF provider, with more than $3.5 billion in assets spread across a family of 36 highly specialized ETFs.
Barclays Global Investors
is the largest ETF provider in the industry, with more than $165 billion in assets as of November.
State Street Global Advisors
Bank of New York
round out the top five.
ETFs, which are index funds that trade on exchanges like ordinary shares of stock, have been one of the biggest growth stories in the asset-management sector, with recent annual growth far in excess of that experienced by most other products. Since their inception in 1993, ETFs in the U.S. have grown into a $289 billion industry, according to recent figures from the Investment Company Institute.
"The addition of PowerShares ETFs is a natural extension of our core mission to provide a broad range of investment management solutions to our diverse clients across the globe," said Marty Flanagan, president and chief executive of Amvescap, in a statement. "Our combination with PowerShares, one of the fastest-growing companies in today's financial marketplace, immediately establishes Amvescap as a significant emerging player in exchange-traded funds."
Amvescap manages assets under the AIM, AIM Trimark, Invesco, Invesco Perpetual and Atlantic Trust brands. The transaction, projected to close in the second or third quarter, is expected to be neutral to slightly accretive to the firm's 2006 earnings.
"Amvescap is an outstanding organization and an excellent fit for PowerShares," said H. Bruce Bond, PowerShares president and CEO, in a statement. "This is a very important event for investors, because, for the first time, a leading investment management company with tremendous institutional and retail distribution capabilities is embracing ETFs."
In addition to the $60 million in cash at closing, Amvescap also will pay $40 million for when management fees for any 30-day period total $17.5 million on an annualized basis, $130 million when management fees total at least $50 million for any 12-month period in the first four years of the deal, and additional contingent payments at the end of the fifth year.