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Invesco (IVZ) in Merger Talks With State Street (STT) Unit

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Invesco Ltd. (IVZ - Free Report) is discussing a potential merger with State Street Corporation’s (STT - Free Report) asset-management business. The news was first reported by the Wall Street Journal, citing people familiar with the matter.

State Street’s asset-management division manages assets worth almost $4 trillion. Thus, if a deal materializes between the firms, it will be regarded as one of the biggest in the industry of late.

The talks are still in the early stage and none of the companies have made any comment on the matter yet.

This news comes just a few days after State Street announced that is set to acquire Brown Brothers Harriman & Co.’s (“BBH”) Investor Services business for $3.5 billion in a bid to ramp up and expand its core custodian business of servicing investment firms.

Once the BBH deal is complete, BBH Investor Services’ employees will move to State Street and its massive assets under custody (AUC) will transition to State Street’s books. This will place the Boston-based company ahead of BNY Mellon (BK - Free Report) in terms of AUC, making it the leading asset servicer globally.

Notably, Invesco, with its robust assets under management balance, strong global presence, diverse product offerings and alternative investment strategies, continues to be well positioned to attract investors, which will likely keep aiding its top-line growth. The company has a robust institutional pipeline and solid retail channel, which along with synergies from opportunistic acquisitions will support further revenue growth.

So far this year, shares of Invesco have gained 42.8% while that of State Street have rallied 19.6%.
 

Zacks Investment Research
Image Source: Zacks Investment Research

Currently, Invesco and State Street carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our Take

Acquisitions have been on the rise in the finance industry of late. In the current scenario, banks are moving toward consolidation to dodge the heightened costs of regulatory compliance and increased investments in technology in a bid to remain competitive. The prevalent low interest-rate environment and other economic challenges following the pandemic have taken a toll on banks’ profitability.

Last month, Seacoast Banking Corporation of Florida (SBCF - Free Report) , the holding company for Seacoast National Bank, announced two separate merger agreements. It agreed to acquire Sabal Palm Bancorp, Inc., the parent company of Sabal Palm Bank based in Sarasota, FL, and Business Bank of Florida, Corp., the parent company of Florida Business Bank based in Melbourne, FL. Both the deals are expected to close in the first quarter of 2022.