The Invesco-Guggenheim Deal Talk Narrows
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Thursday, August 24, 2017

The Invesco-Guggenheim Deal Talk Narrows

An Invesco-Guggenheim deal could be just around the corner, but that deal could be a bit more focused than the early rumors suggested.

Marty Flanagan's Invesco is close to buying a piece of Mark Walter's Guggenheim, Justin Baer of the Wall Street Journal reports. Unnamed sources tell the paper that Invesco would just be buying Guggenheim's ETF business, not its entire retail asset management arm as the rumor went three weeks ago. Guggenheim's retail mutual fund business, the WSJ's unnamed sources say, is now off the table.

The rumored price tag has shifted, too, from about $2 billion to "more than $1 billion," per the WSJ. The all-cash deal, the report goes, would be part upfront, the rest down the line depending on performance. (As of June 30, Invesco had $1.6461 billion in cash on hand.) Given the $36 billion in ETF AUM that Guggenheim has, as reported by the paper, that $1 billion price tag translates into 2.78 percent of AUM. That's lower than the 3 to 6.7 percent ratios from earlier this month (based on widely varying AUM estimates) but substantially higher than Invesco's own current valuation of about 1.6 percent of AUM (with a market cap of $14.07 billion and AUM of $858.3 billion). Indeed, another WSJ reporter, using different metrics (price to forward earnings), currently reckons that Invesco (IVZ on the NYSE) is "the best bet among the bunch" of publicly traded asset managers.

This rumored Invesco-Guggenheim deal would combine the fourth biggest ETF shop in the country (Invesco's PowerShares, $125 billion as of August 22 per's "ETF League Table") with the eighth biggest. PowerShares would remain in fourth place, but it would be nearly twice as big as number five, Charles Schwab ($83 billion).

It's not clear how many Guggenheim people would go to Invesco as part of the deal, though earlier this month the rumor was that Guggenheim's star global chief investment officer, Scott Minerd, would stick with Guggenheim.

The renewed Guggenheim deal rumors come less than a week after Invesco closed on its purchase of big European ETF shop, Source, which has not yet built out a U.S. business.

Meanwhile, the Invesco deal rumors come less than a year after Guggenheim completed the sale of its Rydex Fund Services mutual fund and ETF administration business to MUFG Investor Services. Guggenheim Investments also has a brand new chief, Jerry Miller, and is fighting internal power struggle rumors around Walter and Minerd.

Guggenheim's ETF business is built out of the old Claymore Securities business (purchased in 2009) and Security Benefit's Rydex (bought in 2010). Invesco was even one of the rumored bidders when Guggenheim was selling the Canadian piece of Claymore, though in 2012 iShares parent BlackRock won out.

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