Federated Investors, already one of the US’s largest providers of money market funds (MMFs) that are widely used by American corporates as liquidity management tools, has confirmed a deal to expand the business.
Pittsburgh-based Federated said it had reached a definitive agreement with PNC Financial Services Group for Federated to acquire certain components of PNC Capital Advisors LLC’s investment management business.
In a joint release the two companies said the deal is expected to close in Q4 of 2019. Federated will pay PNC an estimated total purchase price of $52 million upon completion.
Under the proposed transaction, PNC’s family of liquidity, equity and fixed-income mutual funds will reorganise into corresponding Federated mutual funds. Other details the acquisition of a portion of PNC’s separate account and separately managed account business, and the transition of the international equity management team of six members from PNC to Federated.
Breakdown of the deal
In total, Federated is acquiring around $14 billion in assets from PNC. About $9 billion is in assets from three PNC government and treasury MMFs , expected to be transitioned through mutual fund reorganisations. A further $2.7 billion in equity mutual fund assets and $700 million in fixed-income mutual fund assets would be reorganised from an additional 15 PNC funds into 10 existing and three newly-created Federated funds.
To aid in the transition of the investment assets related to the deal, Federated and PNC Capital Advisors are encouraging PNC’s current select equity, structured equity and international separate account and separately managed account clients with around $1.5 billion in assets to move to Federated.
“PNC's institutional asset management business will now be focused on its core strength: providing comprehensive outsourced chief investment officer services and custom investment solutions to help our clients run their businesses better," said Michael P. Lyons, head of corporate and institutional banking and the asset management group at PNC Financial Services Group.
“PNC will continue to proactively deliver value added advice and solutions for our wealth management and institutional clients, leveraging our bespoke investment solutions and strong open architecture platform,” he added.
At the close of the deal, PNC Capital Advisors will continue to manage $21 billion in custom liquidity and fixed-income solutions for PNC's corporate and institutional clients as well as $26 billion in outsourced investment management (OCIO) assets through its institutional advisory business, the news release confirmed.
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