The Macquarie Group Ltd (ASX: MQG) share price has been left behind in today’s rally after it announced a US$1.7 billion ($2.3 billion) acquisition.
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Shares in the investment bank slipped 0.6% in morning trade to $137.58 when the S&P/ASX 200 Index (Index:^AXJO) jumped 0.4%.
It isn’t a great day for financials with many in the sector also nursing losses. But many are faring better than the MQG share price.
Macquarie share price under M&A spotlight
Investors don’t seem too taken with news that Macquarie will purchase Waddell & Reed Financial, Inc. (NYSE: WDR).
Waddell & Reed is one of the oldest asset and wealth management companies in the US with two divisions. The first is an asset management business that manages around US$68 billion. The other is a wealth management division with US$63 billion in assets under administration.
If Macquarie is successful in the takeover, it will flog the wealth management business to LPL Financial Holdings Inc (NASDAQ: LPLA) for US$300 million plus excess net assets.
New partnership and US$68bn AUM boost
LPL is described as a leading retail investment advisory firm in the US and Macquarie will enter into agreement that will position the Australian bank as LPL’s “top-tier strategic asset management partners”.
Waddell & Reed’s asset management business will boost Macquarie’s assets under management (AUM) to US$465 billion.
“The combined business becoming a top 25 actively managed, long-term, open-ended US mutual fund manager by assets under management, with the scale and diversification to competitively position the business to maintain and extend its high standards of service to clients and partners,” said Macquarie in its ASX statement.
Is the MQG share price a buy?
The deal is likely to be consummated by mid-2021 as it has the backing of the target’s board, although it’s still subject to regulatory approval.
The Waddell & Reed share price surged 48% to over US$25 in afterhours trading on the New York Stock Exchange.
It’s not surprising to see the share price of the bidder fall and the target surge. This is typically because mergers and acquisitions (M&A) tend to leave the target’s shareholders better off than those of the bidder.
However, Macquarie has a good track record and any weakness on the news may not persist – especially when things are looking up for this year’s Santa Rally.
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The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.