Victory Capital to Buy Amundi US Business, Form Alliance

Victory Capital Holdings, Inc. VCTR has signed a definitive agreement with Amundi regarding their previously disclosed transaction, aiming to enter into mutual distribution agreements and combine the company with Amundi's US business.

This strategic collaboration is in alignment with Victory Capital's inorganic growth strategy.

In line with the Memorandum of Understanding announced on Apr 16, 2024, Amundi and Victory Capital have decided to enter into reciprocal 15-year distribution agreements effective upon the completion of the transaction.

Per the deal, the Amundi US business (formerly Pioneer Investments) will be merged into Victory Capital. Thus, Amundi will become a strategic shareholder of VCTR with a 26.1% economic stake, subject to customary adjustments. Further, two of Amundi's representatives will join VCTR's board of directors upon the closure of the transaction, subject to requisite approvals. The deal is expected to close in the late fourth quarter of 2024 or early 2025.

Per the distribution agreements, Victory Capital will supply US-manufactured active asset management products to Amundi for global distribution. On the other hand, Victory Capital will distribute Amundi's non-US manufactured products within the United States.

David Brown, chairman and CEO of Victory Capital, stated, "This strategic relationship accelerates the globalization of our firm through a new global distribution channel. The transaction's structure is carefully designed to closely align our common interests."

"In addition, combining the Amundi US business onto our platform will provide important strategic benefits. It will broaden our investment offerings with the addition of new and complementary investment capabilities and will result in a larger and broader US distribution sales and marketing effort and reach" Brown added.

This deal is expected to be earnings-accretive to Victory Capital, achieving low double-digit earnings per share growth within a year of closing. Moreover, roughly $100 million of annual cost savings are anticipated to be realized within a year of closing, with the remaining cost-saving synergies to be realized in the following year.

Additionally, VCTR's net leverage ratio is projected to improve substantially upon the completion of the transaction, driven by higher cash inflows and the absence of any incremental debt within the transaction.

Victory Capital has been previously engaged in several opportunistic acquisitions to diversify its products and strengthen its distribution channels. Since 2013, the company has successfully closed seven acquisitions.

In 2021, it acquired WestEnd Advisors, LLC, to enhance its product portfolio and the solutions offered to the customers. In 2019, it completed the buyout of USAA Asset Management Company.  Management remains optimistic regarding such expansionary initiatives in the future as well.

Over the past six months, shares of Victory Capital have surged 40.2% compared with 8.3% growth recorded by the industry.

Image Source: Zacks Investment Research

Currently, Victory Capital carries a Zacks Rank #3 (Hold).

Inorganic Growth Efforts by Other Finance Firms

Earlier this week, Moody's Corp. MCO fully acquired Global Credit Rating Company Limited (GCR). This move expands the company's footprint in Africa's domestic credit markets. The terms of the deal were kept under wraps.

In 2022, Moody's announced the acquisition of a majority stake in GCR. The combination of GCR's solid footprint in the African market with MCO's worldwide expertise will bolster the latter's presence in the high-growth markets.

Similarly, last week, UBS Group AG UBS marked an important milestone in the integration of UBS and Credit Suisse by completing the merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG. This merger aligns with UBS' growth strategy to strengthen its market presence in competitive regions.

The merging of the Swiss entities simplifies the transition of clients and operations from Credit Suisse (Schweiz) AG to the UBS platform following business, client and product-specific needs. As a result of the merger, clients of Credit Suisse (Schweiz) AG have become clients of UBS Switzerland AG. However, they will continue to interact with UBS using current Credit Suisse platforms and tools until otherwise communicated.

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