Great-West Lifeco Inc. has signed a deal to sell U.S.-based asset manager Putnam Investments to Franklin Resources Inc., and has agreed to a strategic partnership as part of the deal.
Under the deal announced Wednesday, the company that operates as Franklin Templeton will make a payment of US$950 million to US$1.0 billion, consisting of 33.33 million shares at closing and US$100 million in cash six months after closing.
It will also pay up to US$375 million between three and seven years after the deal closes, tied to the growth of the partnership.
Winnipeg-based Great-West Lifeco will keep its controlling interest in quantitative asset manager PanAgora, and realize the value of Putnam’s seed capital, which, together with closing adjustments, are estimated to be worth US$375 million to US$425 million.
It will also retain certain deferred tax assets related to Putnam.
Under the partnership, Great-West Lifeco will distribute Franklin Templeton products and allocate an initial US$25 billion in assets under management to Franklin Templeton’s specialist investment managers within 12 months of the deal closing.
Great-West Lifeco has also agreed to retain shares representing about a 4.9% stake in Franklin Templeton for a minimum five-year period.
“Franklin Templeton is a diversified global asset management firm, well-positioned to take Putnam’s strengths to the next level,” Great-West Lifeco chief executive Paul Mahon said in a statement.
“As client needs for asset management continue to evolve, Franklin Templeton’s scale and breadth, together with Putnam’s complementary capabilities will drive positive outcomes for our companies, our clients, and our investors.”
Barclays analyst John Aiken wrote in a report that investors have been frustrated with the performance of Putnam since Great-West Lifeco’s initial $4.6-billion acquisition of the business in 2007.
“Given that Putnam’s ongoing contribution has been, at best, neutral, we would not expect any material earnings impact from the disposition and the control of just under 5% of Franklin Templeton should be additive,” Aiken wrote in the note to clients.
“Given the negative sentiment that has lingered in the market around Putnam, we believe that the divestiture will be viewed positively and that the capital will likely be deployed into GWO’s strategic growth avenues, such as Empower.”
The sale of Putnam to Franklin Templeton, which requires regulatory approval, is expected to close in the fourth quarter, a release said.
Earlier this year, Great-West subsidiary Canada Life announced its $575-million acquisition of fellow Power Corp. subsidiary Investment Planning Counsel from IGM Financial. The same day, IGM announced its US$622-million acquisition of a 20.5% equity stake in Rockefeller Capital Management.