LONDON (Reuters) – Anglo-American fund management firm Amvescap said on Monday it is to buy U.S.-based PowerShares Capital Management, a provider of exchange traded funds.
The deal comes after chief executive officer Marty Flanagan took the helm at Amvescap last August, joining from rival firm Franklin Resources.
Moving into providing ETFs for clients represented a natural progression for Amvescap, which has strong established distribution lines for its funds, Flanagan told reporters in a conference call.
"We are acting with renewed momentum. (ETFs) is a very dynamic and growing market and one of the fastest growing sectors."
PowerShares is the fourth-largest ETF manager in the United States in terms of assets under management and the second-largest in terms of products, Bruce Bond, President of PowersShares, said.
Although mainly a U.S. firm, PowerShares is looking at what sort of business opportunities exist in Europe, Bond said. PowerShares is the adviser and sponsor of PowerShares XTF, a family of ETF products.
PURCHASE PRICE
Amvescap is paying $100 million — 2.9 percent of PowerShares funds — if the second and third contingent payments are excluded, which is a fairly high price as PowerShares’s business is a relatively low-margin one, Bear Stearns said in a note.
"PowerShares will need to deliver strong growth in funds under management over the next few year to justify the price."
Shares in Amvescap closed up 0.72 percent at 491-1/4 pence.
ETFs, which are listed and trade like stocks, track indexes of bonds, equities and other assets without requiring the investor to buy or sell all the underlying index components.
Since their start in 1993, ETFs in the United States, for example, have grown to $289 billion, based on data at the end of November last year, according to Amvescap.
The transaction, which has to be approved by Amvescap’s board of directors and shareholders of PowerShares’s ETFs, is expected to close in the second or third quarters of 2006, the company said.
Amvescap has suffered outflows of client money over the past 12 months due to weak performance in some of its funds and in the wake of a U.S. financial scandal. In September 2004, the firm agreed a $450 million settlement with U.S. regulators over charges that it allowed improper trading practices at some of its funds.
It is encouraging that the firm has started to look at expanding into new areas like ETFs, said an analyst, who asked not to be named.
Amvescap releases full-year results on February 7. One of the world’s largest listed fund managers by market capitalisation, it is the parent of the Invesco and AIM fund brands.
Fonte: Reuters
