Invesco seals deal for Van Kampen
Adds Morgan Stanley unit for $1.5bn
Morgan Stanley agreed to sell Van Kampen and its other retail asset management businesses to fund management firm Invesco for $1.5bn (€1bn).
The deal, which had been expected, would add about $119bn in assets to Invesco, bringing the Atlanta company's total assets under management to about $535bn. Morgan Stanley will take a 9.4% stake in Invesco worth about $1bn as part of the transaction and also receive $500m in cash.
Morgan Stanley co-president James Gorman touched off the deal talks during the summer, when he called Invesco CEO Martin Flanagan to see if Invesco would be interested in talking about Morgan Stanley's retail fund business. Gorman and other executives at the firm had determined that Morgan Stanley wasn't large enough to succeed in the retail asset management world, but that it still wanted to participate in the business through an equity stake in a larger asset manager.
Morgan Stanley was also working on building its business distributing asset management products through its large joint venture brokerage company with Citigroup's Smith Barney. Large brokerage offices these days tend to prefer products that aren't affiliated with the brokerage firm's parent. So Morgan Stanley wanted to keep a stake in an asset manager that was significant, but not large enough to create problems selling products through the Citigroup joint venture.
Invesco's Flanagan said that he expected cost savings of about $70m per year on the deal, expected to close in the first half of 2010. He added that "the combination is about growing" and "a willingness to compete." As part of the deal, Invesco will get Morgan Stanley's business managing stock investments in Japan.
Morgan Stanley is expected to be able to book an undetermined gain, probably several hundred million dollars, when the deal closes following regulatory and fund shareholder approval. In a statement, Gorman said the transaction was "an important step" in an effort to "return our investment business to strong and consistent profitability, and reignite a best-in-class investment culture." Morgan Stanley will continue to manage about $267bn in assets for institutional investors in a variety of strategies including stocks, bonds, real estate and private equity.
--Write to Aaron Lucchetti at aaron.lucchetti@wsj.com
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