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Federated (FII) to Acquire Funds Worth $431M (revised)

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On Monday, Federated Investors Inc. FII and Horizon Advisers, Inc., an investment advisor, entered into a deal under which the former will acquire certain investment management related assets of Horizon Advisers. Further, the portfolios of three Hancock Horizon funds worth $431 million will be transitioned into mutual funds managed by Federated's advisory subsidiaries. Increased assets under management furnish Federated with various new fund offerings that would benefit its clients.

Closure of the deal awaits completion of certain regulatory and other customary conditions. Moreover, the transaction is expected to close after Jan 2017.

Horizon Advisers – an unincorporated division of Whitney Bank – a wholly owned subsidiary of Hancock Holding Company, acted as the investment adviser to Hancock Horizon Funds.

The fund managers are under pressure due to the lingering low interest rate environment and the increasing number of regulations. Therefore, Federated came up with the plan of buying more mutual fund assets to enhance its business in strategically important segments.

Terms of the Deal

Under the agreement, Federated, one of the largest investment managers, will reorganize one fixed income and two equity funds. It will merge these acquired assets into its existing funds, which possess the same investment objectives, subject to the approval of Hancock Horizon Funds’ shareholders.

Specifically, about $144 million will be reorganized to the Federated MDT Stock Trust from the Hancock Horizon Value Fund, $131 million from the Hancock Horizon Growth Fund to the Federated Kaufmann Large Cap Fund and about $156 million will be transitioned to the Federated Total Return Bond Fund from the Hancock Horizon Core Bond Fund.

For quite some time, Federated has been working with different banks to offer investment products catering to the needs of the clients. Therefore, the company’s experience, along with its proficiency in providing customer service, will be opportunistic for Hancock Horizon funds’ shareholders. Moreover, the completion of deal will enable the shareholders to access a wider array of investment products. Federated is looking forward to many such opportunities in order to provide the best services to its clients.

"As the investment management landscape evolves, firms continue to approach Federated about opportunities for business transactions that can provide them with the opportunity to better accommodate their strategic plans," said Joe Machi, director of alliances at Federated. "We are pleased Horizon Advisers chose to work with Federated, and we continue to look for opportunities with insurers, banks, broker-dealers and investment advisors as they evaluate their long-term goals."

We remain encouraged by Federated’s strategic deals. Under the prevailing pressure in funds owing to the persistent low interest-rate environment and stringent regulations, acquiring assets such as these depicts buoyancy for the company.

Federated currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

The Bank of New York Mellon Corp. BK, with a Zacks Rank #2 (Buy), has been witnessing upward estimate revisions for the last 30 days. So far this year, the company’s share price has been up more than 18.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comerica Inc. CMA has been witnessing upward estimate revisions for the last 30 days. Further, the stock has risen over 47.1% so far this year. It currently holds a Zacks Rank #2.

Fifth Third Bancorp FITB has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have surged nearly 32.2% so far this year. It currently carries a Zacks Rank #2.

(We are reissuing this article to correct a mistake. The original article, issued November 22, 2016, should no longer be relied upon.)


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