State Street Corp. (NYSE: STT) agreed to buy GE Asset Management for as much as $485 million in cash to expand alternative investments such as private equity and real estate.
The purchase will add $100 billion in assets overseen for institutional clients, including retirement plan sponsors, foundations, endowments, sovereign wealth funds and insurers, according to a statement from Boston-based State Street.
The deal “will bring new alternatives capabilities in direct private equity and real estate,” says Ron O’Hanley, who heads State Street Global Advisors (SSGA), the company’s investment management arm. “As defined benefit plans – both private and public – undergo change, GEAM’s skills coupled with SSGA’s existing capabilities will position us well to provide effective solutions and outcomes to these investors.”
O’Hanley, a former executive at Fidelity Investments who pushed that firm into new areas, took over State Street’s $2.25 trillion money management unit in 2015. Once the top provider of exchange-traded funds, State Street lost ground in recent years to BlackRock Inc. and Vanguard Group Inc., which have attracted more client money with new offerings and low fees.
State Street said it plans to issue preferred shares before the transaction closes, which is expected to happen in the third quarter, to offset the impact on its leverage ratios. The bank expects merger and integration costs of $70 million to $80 million through 2018.
In April 2015, General Electric GE (NYSE:GE) announced a sweeping shift away from financial assets and back towards industrial operations. In September, GE said it was putting GE Asset Management up for sale. Other GE divestitures include the $12 billion sale to Canada’s largest pension fund of middle-market lender Antares Capital. Antares co-CEOs David Brackett and John Martin won Mergers & Acquisitions’ 2015 M&A Mid-Market Award for Dealmakers of the Year.
--Additional reporting by Mary Kathleen Flynn