Australian firm to buy Kansas-based Waddell & Reed

Daniel Fowler
December 5, 2020

Australia's Macquarie Group said on Thursday it had agreed to buy US -based investment management firm Waddell & Reed Financial Inc for $1.7 billion in cash, expanding the retail footprint of its largest unit in that market.

The transaction has been approved by the Boards of Directors of LPL Financial, Macquarie Group and Waddell & Reed, and is expected to close in the middle of 2021, subject to regulatory approvals, Waddell & Reed stockholder approval, and "other customary closing conditions".

"We see the deal as financially compelling", said Morgan Stanley analysts in a client note. The deal will also further expand Macquarie's global business, which generated nearly 70% of total income last half, up from about 50% 12 years ago.

After the deal closes, Macquarie will sell Waddell & Reed's wealth management platform to United States investment advisory retail network LPL Financial Holdings for $300 million, and enter into a partnership with the firm.

The U.S. represents the largest client segment in asset management globally, Macquarie said in the statement.

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The sale will benefit shareholders by diversifying revenue, Macquarie said.

Macquarie Group is expanding in the U.S. and will buy a wealth manager for $2.3 billion and partner with another.

"Given Waddell & Reed's current fund performance levels and its higher-than-average fees, the company will be in the crosshairs, in an environment where investors and the advisors that serve them are focused on solid long-term investment performance and reasonable fees", said Morningstar's Warren.

Through its subsidiaries, Waddell & Reed Financial, Inc. has provided investment management and wealth management services to clients throughout the US since 1937. As of September 30, 2020, Waddell & Reed Financial, Inc.'s asset management business had US$ 68 billion of assets under management and its wealth management business had assets under administration of US$ 63 billion.

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