Invesco Ltd.’s rumored takeover of Guggenheim Partners’ exchange-traded fund business could close as early as Thursday, according to sources.
It was reported in early August that the companies were in talks about a merger, and a Financial Times article on Wednesday said the transaction could close as soon as Thursday.
One source told ETF Advisor that the deal will close today at 5:30 eastern time.
Invesco PowerShares has 158 ETFs totaling $129 billion in assets, while Guggenheim has 79 ETFs with $37 billion in assets, according to XTF.com.
The merger makes sense for both companies both financially and strategically, says Todd Rosenbluth, director of ETF and mutual fund research at CFRA.
Regarding the latter, PowerShares and Guggenheim approach the ETF market from a non-market-cap-weighted perspective, he says. PowerShares has focused more on factor strategies such as low-volatility, quality and momentum, whereas Guggenheim’s franchise has been driven by an equal-weighted approach.
Guggenheim has also built a formidable lineup of fixed-income products in the target maturity space with its suite of BulletShares ETFs, which have assets of $9 billion. One source says it’s this product line that Invesco likely covets the most.
Invesco’s likely purchase price has been pegged at between $1 billion to $1.3 billion. After the deal is announced, it would be a number of months before the acquisition officially closes, and one source says the final purchase price could reach $1.3 billion if certain performance levels are met.
Based in New York City, Guggenheim entered the ETF space around the turn of the decade when it bought the respective ETF businesses of Claymore Securities and Rydex SGI.
PowerShares, based in Wheaton, Ill., launched its first ETFs in 2003. It was bought by Atlanta-based Invesco three years later.
Separately, the two companies have become leading players among the mid-tier ETF sponsors. Invesco PowerShares is the fourth-largest U.S.-listed ETF provider. And while the addition of Guggenheim would bulk up its product line, to put it in perspective the combined entity would have just 5.3 percent of U.S. ETF market share. The three largest providers—BlackRock’s iShares unit, Vanguard and State Street Global Advisors—have a combined 83 percent market share.