Shares of Nuveen Investments gained $8.98 to close at $63.14 Wednesday on news it has agreed to be acquired by Madison Dearborn Partners LLC for $5.75 billion. Madison Dearborn will pay $65 per share in cash for Nuveen, a 20% premium to Tuesday's close. The purchase is the biggest-ever asset management LBO. "What really attracts private-equity firms is that asset management firms throw out so much cash," said Ben Phillips, MD of Putnam Lovell NBF Securities. "Nuveen has very high asset margins." The company also owns the ETF Connect website. Nuveen traded at 22x earnings prior to the buyout, ahead of Goldman's 11x but behind the 30x of the S&P Midcap Asset Management & Custody Banks Index. Investment manager James Ellman believes Madison Dearborn is getting a bargain: "[T]he deal could have easily been worth 40% more." Nuveen is selling at 16x trailing Ebitda, leading financial blogger Rick Konrad to note that asset management companies Legg Mason (11x) and Federated (11.3x) look cheap by comparison.
Sources: Bloomberg, MoneyCentral, MarketWatch, Seeking Alpha
Commentary: Nuveen To Be Taken Private: CEF Streamlining To Follow? • Nuveen Acquisition: Will An ETF Provider Jump In? • Nuveen, Top-Ticking the Market [WSJ MarketBeat]
Stocks/ETFs to watch: Nuveen Investments, Inc. (JNC), Legg Mason (NYSE:LM), Federated (NYSE:FII). Competitors: BlackRock, Inc. (NYSE:BLK). ETFs: Financial Select Sector SPDR ETF (NYSEARCA:XLF), PowerShares Financial Preferred Portfolio (NYSEARCA:PGF), iShares Dow Jones US Financial ETF (NYSEARCA:IYF)
Related: ETF Connect
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