Macquarie (ASX:MQG) share price lags on $2.3bn takeover

The Macquarie Group Ltd (ASX: MQG) share price has been left behind in today's rally after it announced a US$1.7 billion ($2.3 billion) acquisition.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Macquarie Group Ltd (ASX: MQG) share price has been left behind in today's rally after it announced a US$1.7 billion ($2.3 billion) acquisition.

Shares in the investment bank slipped 0.6% in morning trade to $137.58 when the S&P/ASX 200 Index (Index:^AXJO) jumped 0.4%.

It isn't a great day for financials with many in the sector also nursing losses. But many are faring better than the MQG share price.

The National Australia Bank Ltd. (ASX: NAB) share price gained 0.2% to $23.05 and even the crisis-ladened AMP Ltd (ASX: AMP) managed to rise 0.1% to $1.77.

a woman

Macquarie share price under M&A spotlight

Investors don't seem too taken with news that Macquarie will purchase Waddell & Reed Financial, Inc. (NYSE: WDR).

Waddell & Reed is one of the oldest asset and wealth management companies in the US with two divisions. The first is an asset management business that manages around US$68 billion. The other is a wealth management division with US$63 billion in assets under administration.

If Macquarie is successful in the takeover, it will flog the wealth management business to LPL Financial Holdings Inc (NASDAQ: LPLA) for US$300 million plus excess net assets.

New partnership and US$68bn AUM boost

LPL is described as a leading retail investment advisory firm in the US and Macquarie will enter into agreement that will position the Australian bank as LPL's "top-tier strategic asset management partners".

Waddell & Reed's asset management business will boost Macquarie's assets under management (AUM) to US$465 billion.

"The combined business becoming a top 25 actively managed, long-term, open-ended US mutual fund manager by assets under management, with the scale and diversification to competitively position the business to maintain and extend its high standards of service to clients and partners," said Macquarie in its ASX statement.

Is the MQG share price a buy?

The deal is likely to be consummated by mid-2021 as it has the backing of the target's board, although it's still subject to regulatory approval.

The Waddell & Reed share price surged 48% to over US$25 in afterhours trading on the New York Stock Exchange.

It's not surprising to see the share price of the bidder fall and the target surge. This is typically because mergers and acquisitions (M&A) tend to leave the target's shareholders better off than those of the bidder.

However, Macquarie has a good track record and any weakness on the news may not persist – especially when things are looking up for this year's Santa Rally.

Motley Fool contributor Brendon Lau owns shares of AMP Limited, Macquarie Group Limited, and National Australia Bank Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

Two businessmen shake hands behind a window.
Mergers & Acquisitions

Why this ASX REIT is quietly pushing back toward its takeover price

Investors push National Storage higher as the final takeover steps come into view.

Read more »

Worried woman calculating domestic bills.
Mergers & Acquisitions

Challenger jumps 4%, Pepper Money sinks as takeover collapses

Bid rejected, premium gone. Here's why one stock fell while the other rallied

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Mergers & Acquisitions

Flight Centre shares lift amid latest UK acquisition news

Flight Centre announced a new UK-based acquisition today.

Read more »

Worried woman calculating domestic bills.
Financial Shares

Pepper Money shares plunge 10% after Challenger slashes takeover offer

The revised proposal comes just over a month after the original takeover approach sparked a strong rally in Pepper’s share…

Read more »

Two young male miners wearing red hardhats stand inside a mine and shake hands.
Mergers & Acquisitions

Fortescue shares lifting off today amid big copper news

With copper prices up 35% in a year, Fortescue is making some strategic moves.

Read more »

A man using a phone shouts and puts his hand out in a stop motion indicating the Yancoal trading halt today
Capital Raising

Magellan requests trading halt ahead of major announcement

Magellan enters a trading halt ahead of a proposed merger and capital raising.

Read more »

Ecstatic man giving a fist pump in an office hallway.
Mergers & Acquisitions

Pepper Money shares pop 25%, Challenger slips 3% on take-private deal

The offer represents a meaningful premium to where the stock had been trading prior to the speculation.

Read more »

A man looking at his laptop and thinking.
Materials Shares

Rio Tinto shares charge higher after Glencore merger collapses

The parties couldn't come to an agreement.

Read more »