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Tuesday, June 14, 2022

A $370B-AUM Pair Are Officially Engaged

Reported by Neil Anderson, Managing Editor

An asset management deal in the wake of an SEC smiting is now officially in the works and expected to wrap up next month.

Yesterday, Rod Martin, chairman and CEO of Voya Financial, Inc., and Christine Hurtsellers, CEO of Voya Investment Management [profile], confirmed that Voya has signed a definitive agreement to buy most of Allianz Global Investors' [profile], after signing a memorandum of understanding (MOU) to that effect last month. Tobias Pross, CEO of AllianzGI, also confirmed that the deal is going forward. (Here's a presentation on the deal and a transcript of a Voya call with analysts.)

The deal is expected to boost Voya IM by roughly 48 percent to about $370 billion in AUM (on a pro forma basis, based on March 31 numbers). AllianzGI will also become a long-term international distribution partner for Voya IM, helping with distribution outside Canada and the U.S., and AllianzGI will take a 24-percent stake in Voya IM.

Goldman Sachs & Co. LLC is advising Voya on the deal, as is PJT Partners, while Cleary Gottlieb Steen & Hamilton LLP is providing legal counsel. The deal is expected to close by July 25.

As part of the deal, several AGI investment teams are expected to join Voya IM. Those moving teams specialize in: fundamental equity; income and growth; and private placement investments. Some of AGI U.S.'s other folks, including some on the distribution side, are also expected to make the shift. (However, AGI U.S.'s structured alpha business, which is at the heart of AGI U.S.'s recent legal woes, will not be part of the Voya deal. And since Voya is buying AGI U.S. assets, not AGI U.S. itself, those legal and regulatory woes will remain AllianzGI's, not Voya's.) (It's also worth noting that AllianzGI separately sold its U.S. mutual fund business to another fund firm last year, while remaining a subadvisor to those funds.)

Once the deal closes, Voya IM is expected to be a bit less fixed income heavy (59 percent of AUM, down from 69 percent) while boosting its equities business (to 31 percent, up from 23 percent). The deal is also expected to push its distribution balance closer to even, to 41 percent retail, 49 institutional, and 10 percent general account (as opped to 28 percent, 57 percent, and 15 percent today, respectively). And the deal is expected to significantly boost Voya IM's international business, to 27 percent of AUM (up from 9 percent today). Hurtsellers will also continue to lead Voya IM.

The Voya team also expects the deal to boost Voya IM's adjusted operating margin up to between 30 and 32 percent on a pro forma basis, compared with 26 percent last quarter.

"This is a highly strategic and financial compelling transaction that supports our focus on growth and value creation for all of our stakeholders," Martin said yesterday on the call with analysts, highlighting the "new strategic distribution partnship with AllianzGI," the complementary nature of the businesses moving over, and the opportunity to "significantly diversify" Voya IM's client mix.

"Voya IM's expertise in fixed income, including private strategies, and alternative investments — combined with the income and growth, fundamental equity and private placement capabilities of AGI U.S. — will make for an even stronger value proposition for our clients," Hurtsellers states. "We are well positioned to serve investors and advisors who seek the expertise, insights and track records that come from our firms' shared investment approach and commitment to active asset management."

Pross, for his part, describes the deal as "a significant milestone in the development of an important strategic partnership for AllianzGI." 

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