Franklin Templeton has agreed to buy rival Putnam Investments for more than $1bn as the California-based asset manager continues its expansion into alternative products and retirement plans.
Franklin will pay Putnam’s owner, Great-West Lifeco, $925mn in cash and shares up front and up to $375mn more over the next seven years if revenue targets are reached. The deal gives the Canadian insurer a 6.2 per cent stake in Franklin.
The deal is the latest in a number of transactions engineered by Franklin chief executive Jenny Johnson as she seeks to reinvent the family-run firm from a traditional stockpicker to a multi-class asset manager. Franklin’s assets have grown from $717bn in 2018 to $1.4tn as of the end of April.
The acquisition of Boston-based Putnam will add another $136bn in assets under management, 30 per cent of which are in retirement plans. Franklin said the deal would nearly double assets managed in its defined contribution business to $90bn.
The two companies have also signed a long-term partnership that will see Great-West Lifeco’s parent, the Power Corporation of Canada, allocate $25bn to Franklin’s alternative investment funds, which had $258bn in assets at the end of April. That will provide an additional boost to Johnson’s efforts to boost earnings by building out the firm’s offerings in high-fee areas such as real estate and private credit.
“This is a compelling transaction for Franklin Templeton, and we are excited about the numerous opportunities that will be unlocked by this long-term strategic partnership,” Johnson said in a statement. “Putnam will add complementary capabilities to our existing specialist investment managers to meet the varied needs of our clients.”
Franklin shares, which are down more than 11 per cent this year, dropped 2 per cent on the news.
In recent years, Franklin has developed a reputation as an aggressive acquirer at a time when many middle-sized asset managers are being squeezed by the growth of index funds and the need to invest in technology. Its 2020 acquisition of Legg Mason for $6.5bn including debt, remains one of the industry’s largest deals. Franklin estimated the Putnam deal would add $150mn in operating income annually after the deal closes in the fourth quarter.
Great-West Lifeco is the sixth-largest life insurer in North America with nearly $2tn in assets. Paul Mahon, its chief executive, said Franklin’s “scale and breadth . . . [made it] well-positioned to take Putnam’s strengths to the next level”.