Aberdeen Asset Management said Thursday it has agreed to acquire Artio Global Investor Inc. (ART) for about $175 million in cash, or $2.75 per share. Artio manages $14.3 billion for retail and institutional clients in fixed income ($9.8 billion) and in international and global equities ($4.5 billion); $7.2 billion of Artio’s AUM is in mutual funds.
Artio’s stock was trading at $2.72 per share in midafternoon trading Thursday, up $0.67 for the day, or 32%; last Feb. 21, ART hit its 52-week high of $5.25. In addition to the Artio acquisition, Aberdeen also announced it was buying a 51% stake in SVG Advisers, a unit of SVG Capital plc, an international private equity and fund management investment firm. Both Aberdeen and SVG Capital are publicly traded on the London Stock Exchange.
Aberdeen said the acquisition is expected to close by the end of Q2 or early in Q3 of this year, subject to customary closing conditions, though it also reported that three of Artio‘s largest shareholders, who control 45% of the total shares outstanding, have already signed voting agreements in favor of the deal.
In a statement, Aberdeen said the Artio acquisition will expand its North American business by deepening its distribution network in both the broker-dealer and RIA channels and add “significant scale” to its existing fixed income business, notably through Artio’s global high-yield and U.S. total return products.
Moreover, the company said the deal is “consistent with Aberdeen’s stated strategy to identify suitable, quality businesses” designed to complement the company’s organic growth, and said it will be “earnings enhancing from the outset.”
These two are just the latest in a string of acquisitions made by U.K.-based Aberdeen, which manages $314 billion worldwide (as proof of its international footprint, it conveniently lists its AUM on the corporate website in pounds sterling, euros and U.S. dollars). Its U.S. operation—Aberdeen Asset Management Inc.—is based in Philadelphia, offering open-end and closed-end mutual funds and asset allocation products through advisors, and is headed by CEO Gary Marshall (left).
In an interview Thursday, Marshall noted three points that made the Artio acquisition attractive.
1) Artio’s fixed-income capabilities in global high yield. “It’s an asset class we were keen to get into ourselves,” Marshall said, further pointing out that Artio’s “substantive” offering in the space also has “a good following.”
2) Speaking of followings, Marshall said another attraction was Artio's reach in the mutual fund business, particularly among RIAs. Raising its footprint among RIAs is a “strategic objective” for Aberdeen.
3) Aberdeen’s penetration in the intermediary space in the U.S. “is almost entirely in equities,” Marshall said, “so it diversifies our reach.”
Martin Gilbert (left), CEO of Aberdeen Asset Management, said in a statement that the transaction “is in line with Aberdeen’s strategy of undertaking infill acquisitions that will assist with growing our business organically. It will be of benefit to our North American business, a region we view as a key growth market for Aberdeen."
For Marshall, looking to deepen Aberdeen's relationship with advisors in both the RIA and overall broker-dealer channels reflects its corporate culture and investing philosophy. “RIAs are careful and considerate investors, and typically long-term investors,” matching Aberdeen’s philosophy, he said. “We’re probably at the extreme end of buy and hold; we hold some companies for 10 years,” many of Aberdeen’s funds have an average annual turnover of 15% and “we invest in these companies because we believe in them long term.”
Marshall admits that “it might take a while” for Aberdeen to secure long-term relationships with advisors, especially RIAs, on its own. While it has hired a number of wholesalers for its own products, “we’re just starting the journey.”
Yes, Aberdeen has “good relationships with a number of the brokerage houses and regionals” but they’re “fresh relationships, maybe built around one or two products.” Artio, by contrast, has had a team of wholesalers “for a longer period of time with deeper relationships, something we couldn’t do for two or three years.”
Thus the acquisition is a “good opportunity to expand our distribution efforts,” while the Artio wholesalers themselves “are excited about having access to a wider range of products” from Aberdeen.
Aberdeen and Marshall have become more visible at advisor gatherings, especially over the past year, as sponsors at advisor conferences, in media briefings, in advertising in industry publications, and at memorable St. Andrew's Day celebrations for the media—complete with Scotch tastings and flown-in haggis.
In addition to its strong presence throughout the U.K., Aberdeen has major offices in China, Japan, Australia, Taiwan, Malaysia, Canada and Brazil.