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Any up-and-coming pop star knows: it is tough to break America. A number of financial institutions have tried to crack the US over the years. Not many have succeeded. Amundi, with aspirations to be Europe’s BlackRock, is making its bid for scale stateside.
It has a long way to go. Catching US rivals such as BlackRock and Vanguard would require hugely bulking up its roughly $2tn of assets under management, a fraction of those peers. But the French asset manager, controlled by Crédit Agricole, is taking to their turf.
The group agreed this week to take a 26.1 per cent interest in Victory Capital Holdings, a $2.8bn US-listed fund manager. This deal should not only nearly triple its assets under management in that huge market, but also improve its profitability there.
This looks smart. No cash will change hands. Amundi US will combine its $104bn of AUM, and its roughly $470mn of revenues, with Victory’s client assets (and $820mn revenues) to create a $279bn manager with distribution throughout the US and Europe.
In return, Amundi receives shares in Victory. Though more than two-fifths of these are non-voting shares, Amundi ends up with two of the nine director seats on the US company’s board. This structure helps circumvent US regulations when globally significant banks, such as Crédit Agricole, own fund management companies.
One can see the attraction for Amundi. First, Victory has a similar business model to its French suitor: buy, integrate, then repeat. It oversees 11 different businesses and its market value has nearly tripled to some $2.9bn in five years. Second, Victory’s cost to income ratio at 49 per cent should help dilute the 60 per cent plus ratio of Amundi US, created from its 2017 purchase of Pioneer Investments from Italy’s UniCredit, points out Tom Mills at Jefferies.
Full details of the transaction are not yet available. But the two sides put the valuation of the Amundi US business and the stake in Victory, once the latter has issued more shares, at about $1bn. On that basis, Amundi will have traded its US business for the equivalent of 1 per cent of its AUM, well above the 0.6 per cent at which the overall group trades.
European investors in asset managers would normally gulp at the thought of growth through acquisitions. The likes of Janus Henderson and Jupiter provide reason for pause. But at least Amundi’s deal, with its announced (pre-tax) cost cutting of $100mn offers hope for a better outcome.
Amundi has a long way to go in terms of its overall ambitions. But this looks a low-risk step along the way.
*This note has been amended to clarify the split in revenues between Amundi US and Victory.
alan.livsey@ft.com
