AMVESCAP to Acquire PowerShares Capital Management Family of 36 ETFs to be Distributed by AIM Investments; Initial Purchase Pric
January 23 2006 - 8:58AM
Business Wire
AMVESCAP PLC today announced it has signed a definitive agreement
to acquire PowerShares Capital Management LLC, a leading provider
of exchange-traded funds (ETFs). PowerShares, based in Wheaton, IL,
currently manages more than $3.5 billion in assets in a family of
36 different ETFs. The initial purchase price of $60 million is
payable at closing for 100% of the fully diluted equity of
PowerShares Capital Management. Subsequent earn-out provisions for
the business are described in the transaction summary below. The
transaction, subject to certain conditions including approvals from
the Board of Directors and the shareholders of PowerShares' ETFs,
is expected to close in the second or third quarters of 2006. "The
addition of PowerShares ETFs is a natural extension of our core
mission to provide a broad range of investment management solutions
to our diverse clients across the globe," said Marty Flanagan,
president and chief executive officer of AMVESCAP. "Our combination
with PowerShares, one of the fastest-growing companies in today's
financial marketplace, immediately establishes AMVESCAP as a
significant emerging player in exchange-traded funds. PowerShares
ETFs and our broad range of actively managed investment products
will provide our clients with one of the industry's most robust and
comprehensive product lines." "PowerShares ETFs and the AIM mutual
funds will serve as complementary investment solutions for
investors and their advisors," said Mark Williamson, president and
chief executive officer of AIM Investments. AIM expects to begin
distribution of PowerShares ETFs following completion of certain
required regulatory steps. "We are very excited about the
possibilities PowerShares products will provide our customers and
are very proud to be at the forefront in bringing this unique
combination of investment opportunities for advisors to use in
intelligent portfolio construction for their clients." ETFs
represent one of the most compelling growth opportunities today in
the asset management sector with recent annual growth far in excess
of that experienced by most other asset management products. Since
their inception in 1993, ETFs in the United States have grown to
$289 billion (as of November 30, 2005) according to the Investment
Company Institute. "AMVESCAP is an outstanding organization and an
excellent fit for PowerShares. We are very excited about our future
together," said H. Bruce Bond, president and chief executive
officer of PowerShares Capital Management. "This is a very
important event for investors because, for the first time, a
leading investment management company with tremendous institutional
and retail distribution capabilities is embracing ETFs. I believe
the result will be a tremendous opportunity for PowerShares,
AMVESCAP, and our clients." An ETF is an investment company with
shares that trade intraday on stock exchanges at market-determined
prices. Investors may buy or sell ETF shares through a broker or in
a brokerage account, just as they would the shares of any listed
publicly traded company. "PowerShares ETFs are distinctive in the
marketplace in that they are based on intelligent investment
indexes, which seek to select the stocks with the greatest
investment merit within a specified universe," said John Southard,
managing director of PowerShares. "This approach is very different
from that of market-weighted benchmark indexes, which simply seek
to be barometers of stock groups without regard to the investment
value of the underlying securities." AMVESCAP PLC obtained
financial advice regarding the transaction from De Guardiola
Advisors and Merrill Lynch & Co. A.G. Edwards served as
financial advisor to PowerShares Capital Management LLC.
Transaction summary: -- $60 million payable in cash at closing for
100% of the fully-diluted equity -- First Contingent Payment -- $40
million, payable in cash when management fees (as defined in the
acquisition agreement) for any 30-day period total $17.5mm on an
annualized basis -- Second Contingent Payment -- $130 million
payable when aggregate management fees total $50 million or more in
any consecutive 12 month period in Years 1-4 -- Third Contingent
Payment -- Calculated at the end of Year 5 based on compound annual
growth in management fees from an assumed base of $17.5 million at
closing; Year 5 management fees reduced by $50 million if Second
Contingent Payment is earned -- For a compound annual growth rate
(CAGR) in Year 5 between 15% and 75%, $5 million for each CAGR
point above 15%, for a maximum payment of $300 million for a 75%
CAGR -- For a CAGR in Year 5 between 75% and 100%, $300 million,
plus an additional $8 million for each CAGR point above 75%, for a
maximum total payment of $500 million for a 100% CAGR -- The
transaction is expected to be neutral to slightly accretive to
earnings in 2006 -- At AMVESCAP's option, up to 35% of the Second
and Third Contingent payments are payable in AVZ stock PowerShares
Capital Management, LLC is an asset management firm headquartered
in Wheaton, IL. PowerShares is the advisor and sponsor of
PowerShares XTF, a family of ETFs. PowerShares Capital Management
LLC seeks to provide compelling investment tools and portfolios for
advisors and investors. PowerShares is committed to theoretically
sound portfolio construction and empirically verifiable investment
management approaches. Its asset management philosophy and
investment discipline is deeply rooted in the application of
intuitive factor analysis and model implementation to enhance
investment decisions. AMVESCAP is a leading independent global
investment manager, dedicated to helping people worldwide build
their financial security. Operating under the AIM, AIM Trimark,
INVESCO, INVESCO PERPETUAL and Atlantic Trust brands, AMVESCAP
strives to deliver outstanding products and services through a
comprehensive array of retail and institutional products for
clients around the world. The company is listed on the London, New
York and Toronto stock exchanges with the symbol "AVZ." Additional
information is available at www.amvescap.com. This release may
include statements that constitute "forward-looking statements"
under the United States securities laws. Forward-looking statements
include information concerning possible or assumed future results
of our operations, earnings, liquidity, cash flow and capital
expenditures, industry or market conditions, assets under
management, acquisition activities and the effect of completed
acquisitions, debt levels and the ability to obtain additional
financing or make payments on our debt, regulatory developments,
demand for and pricing of our products and other aspects of our
business or general economic conditions. In addition, when used in
this report, words such as "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "projects" and future or
conditional verbs such as "will," "may," "could," "should" and
"would," or any other statement that necessarily depends on future
events, are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. Although we make such
statements based on assumptions that we believe to be reasonable,
there can be no assurance that actual results will not differ
materially from our expectations. We caution investors not to rely
unduly on any forward-looking statements. In connection with any
forward-looking statements, you should carefully consider the areas
of risk described in our most recent annual report on Form 20-F, as
filed with the United States Securities and Exchange Commission
(SEC). You may obtain these reports from the SEC Web site at
www.sec.gov.
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