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Rating:The Mountain Comes to Bob. Jenny Makes the Deal Not Rated 5.0 Email Routing List Email & Route  Print Print
Wednesday, May 31, 2023

The Mountain Comes to Bob. Jenny Makes the Deal

Reported by Neil Anderson, Managing Editor

Jenny Johnson has set up a new strategic partnership for Franklin Templeton [profile], and the publicly traded asset manager is poised to acquire an 86-year-old, $136-billion-AUM (as of April 30) mutual fund firm.

This morning, Johnson (president and CEO of Franklin Resources, Inc., aka Franklin Templeton), Bob Reynolds (president and CEO of Putnam Investments [profile]), Jeffrey Orr (chair of Putnam parent Great-West Lifeco, Inc. and president and CEO of Great-West parent Power Corporation of Canada), and Paul Mahon (president and CEO of Great-West) confirm that San Mateo, California-based Franklin has agreed to buy Boston-based Putnam from Winnipeg, Manitoba-based Great-West. The initial price tag for the deal comes out to $925 million, which translates into about 0.68 percent of Putnam's AUM.

Putnam's $136 billion in AUM doesn't include the $33 billion in AUM of PanAgora, a Putnam subsidiary which will stay with Great-West after the Putnam-Franklin deal. And if revenue growth targets are met, Franklin will pay up to $375 million more over three to five years, bringing the total price tag to up to $1.3 billion (i.e. up to 0.96 percent of Putnam's AUM). Franklin had about $1.4 trillion in AUM as of April 30,

MFWire broke the news last week of a potential Putnam sale, identifying Franklin as a likely potential buyer.

Ardea Partners LP and Broadhaven Capital Partners LLC advised Franklin on the deal, and Morgan Stanley & Co. LLC and Rockefeller Capital Management advised Great-West and Putnam. On the legal side, Willkie Farr & Gallagher LLP provided counsel to Franklin, while Sullivan & Cromwell LLP counseled Putnam and Great-West.

The deal is expected to close in the fourth quarter of 2023. Franklin has agreed to pay the $825 million in stock up front when the deal closes, while the $100 million in cash is promised for 180 days after closing.

The Franklin-Putnam deal doesn't mean that the Desmarais family (the power behind Power in Canada) is giving up on the U.S. fund business. The deal will be part of a larger strategic partnership between Franklin, Power, and Great-West. $825 million (89.2 percent) of the price tag will be in Franklin stock, and Great-West will become a "long-term strategic shareholder" in Franklin, holding a stake of about 6.2 percent.

Great-West has also agreed to allocate $25 billion to Franklin's investment offerings within a year after the Putnam-Franklin deal's close, with a hint that that will be boosted in the future. And watch for the deal to strengthen the relationship between Franklin and Empower, a Great-West subsidiary that is a large retirement plan recordkeeper.

News of the Franklin-Putnam deal comes about 16 years after Great-West bought Putnam back in 2007 and about 15 years after Reynolds took over Putnam in 2008.

Johnson describes the Putnam deal as "a compelling transaction" for Franklin and sees "numerous opportunities" in the strategic partnership with Power and Great-West. Among Putnam's capabilities, she specifically highlights the firm's DC I-O efforts.

"Power and Great-West are global leaders across financial services, particularly in the wealth, insurance and retirement channels. With outstanding investment performance, Putnam will add complementary capabilities to our existing specialist investment managers to meet the varied needs of our clients and will increase Franklin Templeton's defined contribution AUM," Johnson states. "We are pleased to welcome Great-West as a strategic investor, along with the impressive team at Putnam."

Orr, for his part, lauds Franklin as "a leading global asset management firm, whose business model is well-positioned to build upon the investment and distribution strengths of Putnam." Mahon puts the strategic partnership in the context of Great-West's broader strategic partnership efforts and praises Franklin's "scale and breadth."

Reynolds describes "strong alignment" between Putnam and Franklin.

"We share a client-centric culture, a core belief in active management, a collaborative and research-based investment approach, and a long-held commitment to fundamental investment principles," Reynolds states. "We look forward to joining Franklin Templeton in this next phase of our growth, as we come together to serve our clients, upholding our commitment to them and their needs."

Editor's Note: A prior version of this story gave the wrong AUM for Putnam for the deal, as one piece is excluded. Without that piece, Putnam had $136 billion in AUM as of April 30. That affects the price/AUM calculation, too, which has been adjusted accordingly. 

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