State Street to Acquire GE Asset Management -- 2nd Update
March 30 2016 - 5:40PM
Dow Jones News
By Sarah Krouse and Anne Steele
State Street Corp. has agreed to buy General Electric Co.'s
asset-management unit for up to $485 million as the Boston-based
firm works to add scale to its money-management division.
The business, which includes GE's U.S. benefits plans as well as
assets for third-party institutional clients, manages more than
$100 billion in assets. The cash deal will give State Street Global
Advisors, known for its index-tracking funds, a broader mix of
money management abilities including private-equity and real-estate
investments.
The deal comes as GE continues to make strides to exit the
financial business by shedding assets of GE Capital. Since
announcing its dismantling plan last April, GE has signed some $161
billion in deals.
State Street's money management business had $2.2 trillion in
assets at the end of 2015 and includes a large lineup of ETFs,
funds run by human stock and bond pickers and hedge-funds. The deal
is poised to help State Street grow in the business of managing
money for insurers and defined-benefit plans that outsource
portfolio management.
Companies are increasingly switching to workplace retirement
plans in which employees stash away money during their careers,
rather than receiving a guaranteed payout from so-called defined
benefit plans. As those plans wind down, firms are asking money
managers to help them manage their remaining assets and
liabilities.
Ron O'Hanley, chief executive officer of SSGA, said in an
interview that growing the portion of the firm's business that
helps companies and endowments that outsource investment decisions
was a priority.
"There's a lot of appeal in the way they put together
portfolios," using internal investment strategies and outside money
managers, he said of GE's benefits plans. He added that the deal
bolsters SSGA's alternatives and fixed-income expertise.
GE Asset Management put in place a staff retention program late
last year to keep what the firm described as "key investment
professionals and employees" in place.
Mr. O'Hanley, who was previously head of Fidelity's asset
management business, joined SSGA early last year and has said he
plans to expand the business in part through
mergers-and-acquisition activity. This is his first deal at the
firm.
At an investor day in February, he said retirement plan
outsourcing, defined-contribution plans in which employees set
aside money for retirement, ETFs and factor-based investing were
among the areas of the business he aimed to grow.
State Street has been GE's custodian for 25 years, managed some
assets for the firm and worked on some "middle office outsourcing",
Mr. O'Hanley said.
The company said it expects the GE asset management deal to
generate up to $300 million in revenue from the deal in the 12
months following its completion. The deal is expected to close in
the third quarter.
Write to Sarah Krouse at sarah.krouse@wsj.com and Anne Steele at
Anne.Steele@wsj.com
(END) Dow Jones Newswires
March 30, 2016 17:25 ET (21:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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