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Invesco (IVZ) to Pay $1.2B to Buy Guggenheim's ETF Business

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Invesco Ltd. (IVZ - Free Report) has agreed to acquire the exchange-traded funds (ETF) business of Guggenheim Partners LLC for $1.2 billion. The deal, which is expected to be completed by the second quarter upon receiving necessary third-party approvals, will be funded using cash and debt.

Earlier in August, there were reports of Invesco buying the entire retail business of Guggenheim Partners. However, per the final deal, only the latter’s ETF business, which is said to have assets under management (AUM) worth more than $30 billion is being purchased. Guggenheim’s ETF business includes a portfolio of fixed income securities that are traded under the name of BulletShares.

This move is part of Invesco’s efforts toward expanding its asset class further. It will add to its already-expanding portfolio, which offers ETFs under the PowerShares label. Once the deal is complete, Invesco's ETF AUM is expected to be worth more than $196 billion globally, as of Aug 31, 2017.

The deal should lead to further improvement in the company’s top line, which has been growing since the last few years, owing to continued improvement in its AUM balance. Moreover, Invesco believes that the transaction will help in expanding, strengthening and broadening its investment capabilities in the growing ETF market globally.

Moreover, the acquisition is likely to enhance Invesco’s ability to provide solutions to its institutional and retail clients, both in the United States as well as globally so that they can better achieve their investment objectives.

Invesco’s President and CEO, Martin L. Flanagan, said, “We've built and managed Invesco over many years with a single focus:  to help clients achieve their investment objectives. Guggenheim Investments' ETF business is highly complementary to Invesco's, and will enable us to provide one of the industry's most comprehensive and innovative ranges of smart beta ETFs, including fixed income, equal-weight and self-indexed product offerings. The addition enhances our ability to help meet client needs, which will help further accelerate the growth of our business.”

Jerry W. Miller, Guggenheim Investments’ president, said, “Guggenheim Investments remains committed to delivering strong, risk-adjusted performance to clients by employing our rigorous and repeatable investment processes, as well as executing sound fundamental research and analysis. We are confident that Guggenheim ETF shareholders will find in Invesco the right partner and platform for our suite of distinctive and innovative ETF products, including one of the industry's leading equal-weight ETF offerings.”

Shares of Invesco have gained 11.4% in a year’s time, underperforming the 27.2% growth for the industry it belongs to.

Currently, Invesco carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the same space are Och-Ziff Capital Management Group LLC (OZM - Free Report) , Affiliated Managers Group, Inc. (AMG - Free Report) and T. Rowe Price Group, Inc. (TROW - Free Report) .

Och-Ziff Capital Management has witnessed an upward earnings estimate revision of 17.9% for the current year over the past 60 days. Its share price has increased 38.2% in the last six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Affiliated Managers carries a Zacks Rank #2 (Buy). The stock has witnessed a marginal upward earnings estimate revision for the current year over the past 60 days, and has increased 16.4% in the past six months.

T. Rowe Price’s Zacks Consensus Estimate for the current year has been revised 1.8% upward over the past 60 days. Its shares have gained 32.9% in the last six months. It also carries a Zacks Rank #2.

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