Following the announcement of the deal to acquire fixed-income
assets worth $421 million, shares of
Federated Investors Inc.
) rallied higher. The shares gained 2.16% to close at $27.49.
On Friday, Federated and Huntington Asset Advisors, Inc., an
investment adviser subsidiary of The Huntington National Bank
entered into a deal under which, Federated will acquire
fixed-income assets worth $421 million. Increased assets under
management furnish Federated with various new fund offerings that
would benefit its clients.
Huntington Bancshares, Inc.
) is the bank holding company of The Huntington National Bank.
The acquisition, which is expected to be completed in the second
quarter of 2014, is anticipated to be tax free. Moreover, closing
of the transaction awaits shareholders' approval and certain
The money market fund managers are under pressure due to the
lingering low interest rate environment and the increasing number
of regulations. Therefore, Federated came up with the plan of
buying more mutual fund assets to enhance its business in
strategically important segments.
Terms of the Deal
Under the agreement, Federated, one of the largest investment
managers, will acquire fixed-income assets worth $421 million
from five Huntington fixed-income mutual funds. These assets will
be merged into five existing Federated fixed-income mutual funds,
which have the same investment objectives.
For quite sometime, Federated has been working with different
banks to offer investment products catering to the needs of the
clients. Therefore, Federated's experience, coupled with its
proficiency in providing customer service, will be opportunistic
for Huntington's shareholders.
Moreover, the completion of the deal will enable the
shareholders to access a wider array of investment products.
Federated is looking forward to many such opportunities in order
to provide cream services to its clients.
FEDERATED INVST (FII): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
HUNTINGTON BANC (HBAN): Free Stock Analysis
TRUSTMARK CP (TRMK): Free Stock Analysis
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Similar Acquisitions in the Past
Since the beginning of 2012, Federated has completed certain
similar deals. Earlier in Sep 2012, Federated and
) closed a deal under which, Federated acquired assets worth $929
million from Performance Funds Trust, a wing of Trustmark.
Previously, in the same month, Federated acquired money market
assets worth $4.4 billion from four Fifth Third money market
funds of Fifth Third Asset Management Inc. (FTAM), the asset
management subsidiary of
Fifth Third Bancorp
In Apr 2012, Federated completed the expansion of its operations
in United Kingdom by acquiring London-based Prime Rate Capital
Management, LLP from Matrix Group Limited. The firm provides
institutional liquidity and fixed-income products.
Federated has the potential to grow in the long run on the back
of its diversified asset and product mix, global expansion and a
fairly healthy balance sheet. Going forward, management expects
to maintain this balanced growth structure.
Moreover, investors' increased demand for the company's wide
range of income-oriented products will help it increase
profitability. However, certain factors like regulatory backdrop,
volatile equity markets and sluggish global economic growth are
likely to keep earnings under pressure.
Federated currently carries a Zacks Rank #3 (Hold).