Shares of the Overland Park, Kan., company at last check were nearly 50% higher at $25.38.
Under the terms, Sydney-based Macquarie will acquire Waddell & Reed for $25 a share, or roughly $1.7 billion.
The boards of both companies have approved the transaction, which is expected to close by mid-2021.
Once the transaction is completed, Macquarie will sell Waddell & Reed’s wealth management business, which has about $63 billion in assets under administration, to LPL Financial Holdings (LPLA) - Get Report for around $300 million.
LPL and Macquarie have also agreed to enter into a long-term partnership, with Macquarie becoming one of LPL’s top tier strategic asset management partners, LPL said in a statement.
Waddell & Reed has an asset management business with about $68 billion in assets under management, and a wealth management business with roughly $63 billion in assets under administration.
Macquarie's assets under management are expected to increase to over $465 billion. The combined business would become a top-25 actively managed, long-term, open-ended U.S. mutual fund manager, measured by assets under management.
The deal is Macquarie Chief Executive Shemara Wikramanayake’s biggest move since taking charge two years ago, Bloomberg reported.
Before she was appointed CEO, Wikramanayake led Macquarie’s asset-management unit, turning it into the group’s most-profitable and fastest-growing division.
The deal will also expand Macquarie’s global business, which generated almost 70% of total income last half, up from about 50% 12 years ago.
Evercore ISI analyst Glenn Schorr upgraded Waddell & Reed to in line from underperform with a $25 price target, according to the Fly.
TS Lim, banking analyst at Bell Potter, told Bloomberg "it's a good deal."
Macquarie “always had a lot a of fire power and it’s probably a good time to expand, which probably tells you a bit more about the way they think about long-term value," Lim said.
"It expands on their annuities-style business segment, so that gives you less volatility and more consistency in earnings.”