Markets
Franklin Resources to Buy Putnam Investments
May
Franklin Resources expanded its acquisition spree, agreeing to acquire rival money manager Putnam Investments from Great-West Lifeco. In a deal valued at up to $1.3 billion in stock and cash, Franklin Resources will pay Putnam’s owner, a Canadian insurance and retirement services company controlled by Power Corp. of Canada. Putnam Investments currently manages approximately $136 billion in assets.
The growing demand for low-cost index funds and the digitization of finance have intensified the pressure on traditional asset managers to cut expenses, increase scale, and venture into alternative-investing businesses that command higher fees.
Franklin Resources has emerged as one of the industry’s most active acquirers, having previously acquired Legg Mason, Lexington Partners, and Alcentra. With the completion of the Putnam deal, Franklin Resources will oversee a total of more than $1.5 trillion in assets.
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Franklin’s successful approach to acquisitions involves preserving the independence of the acquired investment teams while assimilating the supporting operations. Franklin’s CEO, Jenny Johnson, emphasized the importance of maintaining the integrity of people and investment processes in their acquisitions. Additionally, Franklin is actively looking to expand its infrastructure investing offerings.
As part of the agreement, Franklin will integrate Putnam’s investment teams and funds, which have achieved success in selling through retirement plans and insurers. Furthermore, through a new partnership with Great-West and Power Corp., Franklin will enhance its presence on their investing platforms, including Empower, Canada Life, and IG Wealth Management.
Putnam Investments, established in 1937, played a significant role in popularizing mutual funds in Boston. However, the rise of index funds led to a substantial outflow of funds from traditional stock-and-bond pickers like Putnam, with BlackRock and Fidelity Investments surpassing their scale.
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Following the announcement, shares of Franklin Resources experienced a 2.8% decline to $24.01 in midday trading on Wednesday, resulting in a market value of approximately $12 billion. Great-West, listed on the Toronto Stock Exchange, remained relatively unchanged at 38.70 Canadian dollars ($28.50).
Upon the deal’s completion, Great-West will receive around $925 million, including 33.3 million Franklin shares, making it one of the firm’s major shareholders, along with an additional $100 million in cash six months later. Franklin has the potential to pay an additional $375 million over time if its partnership with Great-West and Power Corp. achieves revenue-growth targets. The partnership has committed to allocating $25 billion to Franklin investment managers within the first year.
Great-West will retain Putnam’s PanAgora, a Boston-based quantitative investment manager, along with its seed capital.