In an effort to further diversify its global footprint, Invesco Ltd. (IVZ) has agreed to acquire a 49% stake in Religare Asset Management Co., the asset management division of Religare Enterprises Ltd – an Indian financial services company. Although the financial details of the transaction were undisclosed, the amount is estimated to be around $90 million, according to market rumors.
The joint venture will be known as Religare Invesco Asset Management Company. The current CEO of Religare Asset Management Co., Mr. Saurabh Nanavati, together with the present management will head the newly-formed unit.
JPMorgan Chase & Co. (JPM) and Amarchand Mangaldas – an Indian law firm– were advisors to the deal for Religare, whereas another Indian law firm, AZB partners, advised Invesco. The closing of the deal is subject to regulatory consent.
Management at Invesco believes that the deal will be a positive growth driver for both the companies. In addition to expanding Invesco’s footprints in an emerging economy, the deal will provide the company’s global customers a more diversified range of investment solutions.
Religare, on its part, is delighted to join forces with a globally reputed asset management firm. With a consistent track record and solid growth in revenue, the company believes that its retail as well as offshore businesses would gain impetus for more development following the deal.
The sluggish economic recovery has negatively impacted the financials of Invesco. Moreover, the regulatory landscape in the U.S. is gradually becoming more stringent with the Federal Reserve’s newly proposed rules. Further, the prevailing low interest rate environment has acted as headwinds.
In order to mitigate these negatives, Invesco is focused on taking advantage of the rapidly growing emerging markets. We expect the deal to help it recover its financials to some extent.
Invesco currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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