Invesco Ltd. has agreed to acquire Massachusetts Mutual Life Insurance Co.'s asset management affiliate, OppenheimerFunds Inc.
Under the deal terms, MassMutual and OppenheimerFunds employee shareholders will receive a consideration consisting of 81.9 million shares of Invesco common equity and $4 billion in perpetual, noncumulative preferred shares with a 21-year non-call period and a fixed rate of 5.9%. The Financial Times' Ignites service reported in September that the parties were in talks over a roughly $5 billion deal.
The 81.9 million shares include approximately 6.6 million shares to be issued as a part of the post-closing conversion of unvested restricted stock awards, currently held by OppenheimerFunds employees, into Invesco restricted stock awards.
Upon the closing of the deal, MassMutual will become a significant shareholder in Invesco, with an approximate 15.5% stake.
The deal is expected to boost Invesco's total assets under management to more than $1.2 trillion.
Invesco and MassMutual are expected to enter into a shareholder agreement, in which MassMutual would have minority shareholder rights, including representation on Invesco's board. MassMutual will nominate William Glavin Jr., current independent board member of OppenheimerFunds and its retired CEO. The shareholder agreement specifies a lock-up period of two years for the common stock.
The transaction is subject to regulatory and other third-party approvals, and is expected to close in the second quarter of 2019.
Invesco also announced a $1.2 billion common stock buyback program. The program will be completed within the next two years and will be financed through the operating cash flows of the combined organization.
Further, Invesco reported third-quarter net income attributable to the company of $269.6 million, or 65 cents per share, compared to $267.5 million, or 65 cents per share, in the year-ago quarter.
Adjusted net income attributable to the company came in at $274.4 million, or 66 cents per share, versus $291.8 million, or 71 cents per share, in the year-ago quarter.
The S&P Global Market Intelligence consensus normalized EPS estimate for the quarter was 66 cents.
Total operating revenues stayed nearly flat year over year at $1.34 billion. Investment management fees decreased 2.2% year over year to $1.04 billion from $1.06 billion.
Long-term net outflows were $11.2 billion and total net outflows were $4.9 billion for the third quarter.
Assets under management were $980.9 billion at Sept. 30, up from $963.3 billion at June 30 and $917.5 billion at Sept. 30, 2017.