Macquarie buys US asset manager Delaware Investments

The Macquarie Group yesterday announced the acquisition of US-based asset management firm Delaware Investments for $428 million. Macquarie has earlier articulated a strategy of using M&A to consolidate its position in its core businesses, taking advantage of opportunities created by the financial crisis, and yesterday's deal fits squarely into this strategy.

Delaware had assets under management of $125 billion as of June 30 and will bring the Macquarie Group's AUM to over $300 billion. Macquarie Funds Group (MFG), the asset management arm of Macquarie, had around $67 billion of AUM as of July 31.

Macquarie Bank will provide funding for the deal, which is expected to close by the end of this calendar year. The acquisition cost of $428 million is payable in cash and subject to adjustment at closing based on the level of net assets. The price represents 0.3% of AUM. Specialists referred to the price as attractive, especially when viewed in light of the opportunity for margin expansion under the Macquarie ownership.

Macquarie Capital (USA) advised Macquarie on the deal with Weil, Gotshal & Manges providing legal counsel.

Delaware Investments is owned by Philadelphia-based Lincoln Financial Group. LFG had an AUM of $171 billion as of March 31 across a range of products, including annuities; insurance; retirement plans; and comprehensive financial planning and advisory services. LFG's performance has been under pressure in the wake of the financial crisis and it has been exploring asset disposals.

According to a transcript posted on seekingalpha, LFG said in its second-quarter earnings call on July 31 that Delaware had a quarter of positive net flows and that "each of Delaware's 11 largest mutual funds beat its Lipper [a producer of mutual fund performance data] peer group's average return over a one-year period".

In a written statement announcing the deal yesterday, LFG said that exiting Delaware would allow it to enhance focus on its core principal insurance and retirement businesses.

Goldman Sachs ran an auction for Delaware on behalf of LFG. Aberdeen Asset Management was also reported to be in the fray during the early stages, but in the end, the deal was done principal-to-principal between LFG and Macquarie, said sources.