State Street Agrees to Acquire GE Asset Management
State Street Agrees to Acquire GE Asset Management
Will add new alternatives capabilities and strengthen fundamental equity and active fixed income teams, while establishing State Street Global Advisors (SSGA) as a leader in outsourced chief investment officer (OCIO) services
GE Asset Management – Total purchase price of up to $485 million – transaction expected to be accretive to operating-basis EPS for the first full 12–month period following the close of the transaction
BOSTON–(BUSINESS WIRE)–State Street Corporation (NYSE: STT), announced today that it has agreed to acquire GE Asset Management (GEAM), a leading asset manager, from GE (NYSE: GE). The transaction is expected to increase SSGA’s assets under management by approximately $100 billion upon closing and add new alternatives capabilities, while strengthening existing fundamental equity and active fixed income teams.
“This transaction reflects our view of GEAM as a very high quality organization with strong cultural alignment with SSGA. It is also reflective of our desire to allocate capital to higher growth and return businesses”
“This transaction reflects our view of GEAM as a very high quality organization with strong cultural alignment with SSGA. It is also reflective of our desire to allocate capital to higher growth and return businesses,” said Jay Hooley, chairman and chief executive officer of State Street Corporation. “We believe this will help accelerate our strategic plan to extend our capabilities in key areas for our clients.”
Under the agreement, State Street will acquire GEAM in a cash transaction with a total purchase price of up to $485 million, subject to adjustments. Pending regulatory approvals and other customary closing conditions, the transaction is expected to be finalized early in the third quarter of 2016. State Street expects the transaction to be accretive to operating-basis earnings per share for the first full 12–month period following closing.
GEAM has more than $100 billion in assets under management for more than 100 institutional clients, including corporate and public retirement plan sponsors, foundations, endowments, sovereign wealth funds and insurance companies. GEAM and its predecessor organizations have been managing investments for GE’s US pension and other benefit plans for over 80 years.
“As defined benefit plans – both private and public – undergo change, GEAM’s skills coupled with SSGA’s existing capabilities will position us well to provide effective solutions and outcomes to these investors,” said Ron O’Hanley, president and chief executive officer of SSGA. “GEAM will bring new alternatives capabilities in direct private equity and real estate to SSGA while enhancing our existing active fundamental equity, active fixed income and hedge fund teams. In addition, GEAM’s OCIO and Insurance platforms significantly strengthen our capabilities in these fast growing areas.”
“State Street’s acquisition of GEAM will combine the proven capabilities of two leading asset management firms with great track records and complementary investment offerings, and create a unique opportunity to expand these areas of our businesses together as we leverage each other’s considerable investment experience and expertise,” said Dmitri Stockton, chairman, president and chief executive officer of GE Asset Management. “In addition, SSGA’s significant experience managing retirement assets will ensure we are well positioned to continue to deliver superior results in the management of assets on behalf of GE benefit plan participants.”
“GE benefit plan trusts have been servicing clients of State Street for more than 25 years, and today’s announcement demonstrates the strength of our relationship and the value we can provide to our clients across both of our asset servicing and asset management businesses,” O’Hanley added.
GE Asset Management – State Street Projected Transaction Financial Metrics:
- Excluding restructuring charges, the transaction is expected to be accretive to operating-basis EPS for the first full twelve–month period following the close of the transaction.
- Targeted client asset retention rate: greater than 90 percent.
- IRR expected to exceed our target 11% hurdle rate, assuming achievement of planned synergies.
- In the first full twelve-month period following the close of the transaction, fee revenue from the transaction is expected to be approximately $270 million to $300 million.
- Total projected merger and integration costs: $70-$80 million through 2018.
- It is estimated that the transaction would result in a reduction of 40-50 bps to State Street Corporation’s fully phased-in risk-based capital ratios under both standardized and advanced approaches and of approximately 15-20 bps to its fully phased-in tier 1 leverage and supplementary leverage ratios.
- We anticipate issuing preferred shares prior to the close of the transaction to offset the impact on our leverage ratios and, with that issuance, do not expect the closing of the transaction to have any material impact on our common stock repurchase program.
About State Street Corporation:
State Street Corporation (NYSE: STT) is the world’s leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $28 trillion in assets under custody and administration and $2 trillion* in assets under management as of December 31, 2015, State Street operates globally in more than 100 geographic markets and employs 32,356 worldwide. For more information, visit State Street’s website at www.statestreet.com.
About State Street Global Advisors:
For nearly four decades, State Street Global Advisors has been committed to helping our clients, and those who rely on them, achieve financial security. We partner with many of the world’s largest, most sophisticated investors and financial intermediaries to help them reach their goals through a rigorous, research-driven investment process spanning both indexing and active disciplines. With trillions* in assets, our scale and global reach offer clients access to markets, geographies and asset classes, and allow us to deliver thoughtful insights and innovative solutions.
State Street Global Advisors is the investment management arm of State Street Corporation.
*Assets under management were $2.24 trillion as of December 31, 2015. AUM reflects approx. $22.0 billion (as of December 31, 2015) with respect to which State Street Global Markets, LLC (SSGM) serves as marketing agent; SSGM and State Street Global Advisors are affiliated.
About GE Asset Management:
GE Asset Management Incorporated (GEAM) is a global asset manager with $110 billion in assets under management (as of December 31, 2015). GEAM and its predecessor organizations have been managing investments for GE’s U.S. pension and other benefit plans for over 80 years. In 1988, the firm began offering investment management products and services to investors outside GE, and today manages portfolios for more than 100 institutional clients—including corporate and public retirement plan sponsors, foundations, endowments, sovereign wealth funds, insurance companies, and GE affiliates. GEAM also manages portfolios for GE employees and other individual investors through its mutual fund platform. Investment offerings cover all major asset classes, including U.S. and international equities, fixed income and alternative assets. Assets are invested side-by-side with the corresponding GE benefit plan portfolios and managed by the same investment professionals, aligning GEAM’s interests with those of its clients.
State Street Corporation’s Forward-Looking Statements:
This news release contains forward-looking statements as defined by United States securities laws, including statements relating to our goals and expectations regarding our planned acquisition of GEAM, including: benefits to, and effects on, our business, capabilities and opportunities; our targets to transition, and plans to integrate, GEAM, including the effects of synergies; and the transaction’s effects on our results of operations, financial condition and capital ratios. Forward-looking statements are often, but not always, identified by such forward-looking terminology