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Friday, May 12, 2006

Federated To Acquire MDT Advisers

by: Armie Margaret Lee

Federated Investors Inc. said Friday it has agreed to buy quantitative equity manager MDT Advisers for up to $240 million.

Cambridge, Massachusetts-based MDT Advisers, a unit of MDTA LLC, manages roughly $6.8 billion in separately managed account portfolios and institutional accounts, and approximately $300 million in mutual funds that utilize its quantitative investment process.

The deal, which is expected to close in July 2006, includes initial purchase payments of approximately $110 million, most of which will be paid at closing, and a series of contingent payments totaling up to $130 million over the next three years based on growth.

MDT's investment employees will remain with the firm in Cambridge and continue to manage portfolios, Federated said.

"Combining the proven investment acumen of MDT's team and process with Federated's distribution muscle will give our firm a powerful new growth opportunity," said J. Christopher Donahue, president and chief executive officer of Federated, in a statement.

The acquisition, he said, will boost Pittsburgh-based Federated's product lineup by creating a quantitative line of equity mutual funds to complement the 39 equity mutual funds. Federated's investment process combines quantitative and fundamental research.

When the transaction is completed, Federated would manage about $38.7 billion in equity assets, up 22 percent from $31.6 billion in end-March. The firm would also own approximately 90 percent of the outstanding equity interests of MDTA LLC, with the right to purchase the remaining 10 percent by June 30, 2007.

Gordon Ceresino, president and chief executive of MDT, said his firm entered the deal "not only because of [Federated's] longstanding reputation in the industry and distribution strength, but also because they share our core business values by focusing on long-term investors." 

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