Invesco will purchase OppenheimerFunds from Massachusetts Mutual Life Insurance Co. for about $5.7 billion in stock, Invesco said Thursday, Oct. 18. Invesco shares rallied in premarket trading by more than 10%.
Since the transaction is all in stock rather than cash, MassMutual will now become a roughly 15.5% owner of Invesco.
"The highly complementary investment and distribution capabilities of Invesco and OppenheimerFunds will strengthen the combined organization's ability to provide more relevant investment outcomes to an expanded number of institutional and retail clients in the US and around the globe," Invesco said in a press release.
The Invesco and Oppenheimer combination will lift Invesco's assets under management to around $1.2 trillion. It's AUM stood at $980.9 billion in September, according to the company. The "highly compelling financial returns" to be reaped as a result of the deal could add 18% to Invesco's bottom line in 2019 and 27% in 2020.
The deal aims to expand Invesco's distribution capabilities, as Oppenheimer has focused on its third-party distribution platforms.
Analysts at RBC Capital Markets were encouraged by the move. "Our preliminary view is that positively management seems confident they can generate attractive returns from the acquisition," the analysts wrote.
Bank of America Merrill Lynch advised Invesco on the transaction, as did Ardea Partners.