What to Make of the Invesco-Oppenheimer Hookup Rumor
With both firms being viewed as average when it comes to performance and product offering, we'd view this as more of a pricey scale move.
We're not sure what to make of the rumor that emerged late this week that narrow-moat
Bulking up on AUM in areas where both firms are feeling the greatest amount of fee and expense pressure should allow Invesco and Oppenheimer to consolidate efforts and keep their operating margins from getting hit too hard, and potentially improve overall product performance. That said, with both firms being viewed as average when it comes to performance and product offering (with Oppenheimer's global and international equity fund platform being the exception), we'd view this as more of a scale move (if the rumor proves to be true). But with a supposed price tag of $5 billion (equivalent to 2% of AUM and just under 13 times our estimate of Oppenheimer's EBITDA), this seems to be a high price to pay for a scale-driven deal, especially since Invesco has already spent $1.5 billion during the past year rolling up Source's and Guggenheim's ETF operations. We're leaving our moat rating and $35 per share fair value estimate in place until we have more concrete details that a deal is actually in the works.
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