Invesco Takes Aim To Form Fund Giant

The combined group will be called Amvesco Plc and have around $150 billion under management. The merger values AIM at approximately $1.6 billion, Invesco said.

We are creating a prototype company for the future, Bob McCullough, Invescos chief financial officer, told Reuters.

But analysts were divided as to the timing of the deal although most were happy to give Invesco the benefit of the doubt as far as its claims on synergy are concerned.

The deal is exquisitely timed for the AIM shareholders and conversely not so exquisitely for Invesco shareholders, said Martin Cross, analyst at UBS.

Cross argues that Invesco is buying at the top of the Wall Street market which many see as having some very stretched valuations. Cross said that UBS strategists are forecasting a 15 percent downward correction on the Dow Jones index next year which, if it came to pass, would leave AIM looking rather expensive.

 

But Phillip Gibbs at BZW was upbeat about the merger. It looks rather cheap, I think theyve done rather nicely, Gibbs said but did add a rider on the possibility of a major correction in the US equities market.

Analysts said the price paid by Invesco was something short of what had been predicted but Cross said it was a pretty full price but what one might expect for a premium company.

Invesco shares closed unchanged at 237.5p Invescos chairman and chief executive Charles Brady, the man who will lead the new group, said it would have the scale necessary for success as a financially strong and independent business operating in an increasingly concentrated industry.

Invesco said it would fund the merger with the issue of 290 million new shares to existing holders of AIM shares.

These would be valued at approximately $1.1 billion. AIM shareholders will own around 45 percent of the enlarged group and be subject to restrictions on selling the shares.

McCullough said the merger, which is conditional on approval by both Invesco and AIM shareholders and other approvals, would be non-dilutive and would not have any cost savings built-in.

However, there would be cost savings in the future, he said. The merger is not expected to be completed before February. McCullough also said the $500 million needed to fund the merger would come in the form of cash and debt, with a one-for-five rights offering on the cards. This would involve issuing roughly 50 million new shares, he said.

McCullough said the cost of the merger was not excessive. If you look at it on the basis of funds under management, it (the cost) is less than three percent, he said.

Theres no question that it is a lot of money, but we view this as a long-term investment for both of us, he said.