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Rating:Invesco Pulls the Trigger on Van Kampen Deal Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, October 19, 2009

Invesco Pulls the Trigger on Van Kampen Deal

Reported by Sean Hanna, Editor in Chief

Invesco is buying Morgan Stanley’s retail asset management business for $1.5 billion in a deal that includes Van Kampen Investments. Invesco will use a mix of cash and stock to fund the deal, which is expected to close in the middle of next year. Morgan Stanley will have a 9.4 percent stake in Invesco.

Marty Flanagan
Invesco
President and CEO
The transaction will add $119 billion in assets under management (AUM) to Invesco as well as 650 investment, distribution and operations support professionals globally.

The purchase price works out to 1.26 percent of AUM and represents 7.7 times the 2009 run-rate EBITDA of the Morgan Stanley business.

The deal will vault Invesco to the tenth spot among the largest US fund managers, with $122 billion in projected long-term assets, Invesco officials said in an investor presentation.

"This combination of talented teams from both organizations will enhance Invesco's ability to deliver meaningful solutions to our retail and institutional clients around the world, and better position Invesco for long-term success," said Invesco president and CEO Marty Flanagan in a news release.

Invesco will have a total of $536 billion of AUM globally, $360 billion of which are US assets.

It was not immediately clear what roles key executives at Van Kampen, including president and CEO Jerry Miller, will have in the combined firm.

Van Kampen has reportedly been on the block since at least August, and Invesco's name has been in the running since the beginning.

"Our objective in Asset Management is straightforward: deliver superior performance for our clients, return our investment business to strong and consistent profitability, and reignite a best-in-class investment culture," said Jamie Gorman, Morgan Stanley co-president. "This transaction is an important step in that direction."

Morgan Stanley will focus on institutional clients such as corporations, pension plans, large intermediaries, foundations and endowments, sovereign wealth funds and central banks.

Gorman said the transaction will also "mitigate certain affiliated product sales restrictions faced by Van Kampen portfolio managers since the closing of the Morgan Stanley Smith Barney joint venture."

When the deal is complete, Morgan Stanley Investment Management's long-only institutional business will be led by an operating committee composed mainly of senior portfolio managers. Stu Bohart, co-head of MSIM, will chair the committee.

The Invesco-Morgan Stanley deal is only the latest in a string of asset management deals this year. To read more about other recent deals, see The MFWire's Deal Sheet.


Invesco Press Release

Atlanta, October 19, 2009 --- Invesco Ltd. (NYSE: IVZ) announced today it has entered into a definitive agreement to acquire Morgan Stanley’s retail asset management business, including Van Kampen Investments. Through this transaction, Invesco acquires a diversified business with $119 billion in assets under management (AUM) across equity, fixed income, alternatives (including mutual funds and separate accounts) and unit investment trusts. Furthermore, Invesco’s organization will expand by approximately 650 investment, distribution and operations support professionals globally.

The transaction is valued at $1.5 billion, including cash and stock that provides Morgan Stanley a 9.4% equity interest in Invesco. Details of the transaction are described more fully below.

Consistent with Invesco’s strategic priorities, this combination will strongly benefit clients and fund shareholders of both organizations by:

  • Expanding the depth and breadth of our investment strategies, which will enable Invesco to offer an even more comprehensive range of investment capabilities and vehicles to our clients around the world;
  • Enhancing our ability to serve U.S. clients by positioning Invesco among the leading U.S. asset managers by AUM, diversity of investment teams and client profile;
  • Deepening Invesco’s relationships with clients and strengthening our overall distribution capabilities; and
  • Further strengthening our position in the Japanese investment management market.

    “We are excited to expand the depth and breadth of our investment strategies, which will enable us to offer our clients a truly comprehensive range of investment capabilities through an expanded set of investment vehicles,” said Martin L. Flanagan, Invesco president and CEO. “This combination of talented teams from both organizations will enhance Invesco’s ability to deliver meaningful solutions to our retail and institutional clients around the world, and better position Invesco for long-term success.”

    “This complementary combination fully meets Invesco’s previously stated acquisition criteria, and we believe strongly benefits our clients and shareholders,” said Loren Starr, chief financial officer of Invesco. “We expect that this transaction will be approximately 11% accretive in the first 12 months after close and have an IRR of approximately 30%.”

    At closing, Invesco will have approximately 700 investment professionals, with a meaningful presence in all major markets around the world.

    Terms of the transaction

    Under the terms of the agreement, Invesco would acquire Morgan Stanley’s retail asset management business, including Van Kampen Investments in exchange for $1.5 billion, comprising $500 million in cash and 44.1 million shares representing $1 billion in Invesco equity.

    The transaction, which has been approved by the boards of directors of both companies, is expected to close in mid-2010, subject to customary regulatory, client and fund shareholder approvals.

    Conference call tomorrow at 10:00 AM ET

    Marty Flanagan, Invesco president and CEO, and Loren Starr, Invesco chief financial officer, will host a conference call for members of the investment community and the media on Tuesday, October 20, 2009. Those interested in participating may listen to the conference call at 10:00 AM ET, by dialing one of the following numbers: 1-888-455-2053 for U.S. and Canadian callers and 0800-917-6808 for U.K. callers or 517-268-4676 for international callers. An audio replay of the conference call will be available until Tuesday, October 27, 2009, at 5:00 p.m. ET by calling 800-860-4710 for U.S. and Canadian callers or 203-369-3368 for international callers. The presentation will be made available via a simultaneous Webcast at www.invesco.com. The presentation slides that will be reviewed during the conference call will also be available on Invesco’s Web site at www.invesco.com.

    About Invesco Ltd.

    Invesco is a leading independent global investment management company, dedicated to helping people worldwide build their financial security. By delivering the combined power of our distinctive worldwide investment management capabilities, Invesco provides a comprehensive array of enduring investment solutions for retail, institutional and high net worth clients around the world. Operating in 20 countries, the company is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.

    About Morgan Stanley

    Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 1,200 offices in 37 countries.

    About Van Kampen Investments

    Van Kampen is one of the nation’s largest investment management companies, offering a broad array of open-end and closed-end mutual funds, unit investment trusts, retirement products and investment platforms. The AUM and employee data referred to in this press release are as of September 30, 2009.

    Morgan Stanley Press Release

    Morgan Stanley (NYSE: MS) today announced as part of a restructuring of its investment management division a definitive agreement to sell its retail asset management business, including Van Kampen Investments, Inc., to Invesco Ltd. (NYSE: IVZ), a leading independent global investment management company. This transaction allows the Firm to focus on its institutional client base - including corporations, pension plans, large intermediaries, foundations and endowments, sovereign wealth funds, and central banks, among others.

    Under the terms of the definitive agreement, Invesco will purchase Morgan Stanley's retail asset management business, operating under both the Morgan Stanley and Van Kampen brands, in a stock and cash transaction valued at $1.5 billion. Morgan Stanley will receive a 9.4 percent minority interest in Invesco, allowing the Firm to participate in the future growth of the combined Invesco and Morgan Stanley/Van Kampen businesses. The transaction, which has been approved by the Boards of Directors of both companies, is expected to close in mid-2010, subject to customary closing conditions and regulatory approvals.

    James Gorman, Co-President of Morgan Stanley, said, "Our objective in Asset Management is straightforward: deliver superior performance for our clients, return our investment business to strong and consistent profitability, and reignite a best-in-class investment culture. This transaction is an important step in that direction. By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player.

    "The combination of Invesco's strong and diversified product portfolio with Van Kampen's own product strengths and leading distribution capabilities will create a formidable new contender in the retail space - with the size and scale necessary to compete in today's rapidly changing and consolidating marketplace. In addition, this transaction will mitigate certain affiliated product sales restrictions faced by Van Kampen portfolio managers since the closing of the Morgan Stanley Smith Barney joint venture."

    Going forward, Morgan Stanley Investment Management (MSIM) will be comprised of several distinct institutional-focused businesses. These include: a long-only institutional business (including equity and fixed income), a direct hedge fund business, a fund of funds business, a liquidity business, and a merchant banking business, including the Firm's real estate, private equity and infrastructure units. In Japan, MSIM's equity management businesses will be sold to Invesco as part of the transaction, but MSIM will retain its fixed income investment team and a sales and client service team to serve Japanese investors. The restructured MSIM would have approximately $267 billion in assets under management on a pro-forma basis as of June 30, 2009.

    MSIM's long-only institutional business will now be led by an Operating Committee comprised primarily of senior portfolio managers whose interests will be aligned with their individual portfolios and the broader business. Stu Bohart, Co-Head of MSIM, will chair the Operating Committee.

    Mr. Bohart said, "Our role as a fiduciary is at the heart of everything we do at MSIM. We believe a more streamlined, portfolio manager-led organization dedicated to fundamental research and active asset management will put us in an even stronger position to produce superior long-term investment results in equity, fixed income and asset allocation; develop durable products of appropriate size; and deliver first-class client service. And by further aligning the interests of the Firm, senior staff and clients, we expect to enhance our ability to attract top investment management talent."

    Mr. Bohart continued, "We are refocusing our efforts towards greater profitability from a solid foundation, building on the strength and momentum already achieved in key businesses. We continue to see strong long-term performance in many of our actively managed strategies across the 1-year, 3-year, 5-year and 10-year time periods and look forward to building on the success of our investment partnerships with institutional investors and intermediaries globally.

    Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 1,200 offices in 37 countries. For further information about Morgan Stanley, please visit www.morganstanley.com.
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