Last Friday, Federated Investors Inc. (FII) announced that it has reached an agreement to acquire $17 billion in Money Market Assets from SunTrust Banks Inc. (STI). Currently, the assets are managed by SunTrust’s RidgeWorth Capital Management Inc. and its subsidiary StableRiver Capital Management LLC. The transaction is expected to close by year end.
As part of this transaction, the assets which are currently managed in nine RidgeWorth money market mutual funds will shift to six existing Federated money market mutual funds having similar investment objectives. Additionally, certain assets which SunTrust Bank maintains in collective and common funds will also move to Federated money market mutual funds.
Federated Investors, which managed nearly $350 billion in assets as of Mar 31, 2010, is scheduled to announce its second quarter earnings on July 22. The Zacks Consensus Estimate for the second quarter is 40 cents per share.
Federated’s first quarter earnings of 38 cents per share missed the Zacks Consensus Estimate by 5 cents, primarily due to the increase in voluntary fee waivers, reduced top-line growth and lower assets under management. However, an increase in fixed income equity funds, fixed income assets and equity assets, and a decline in both operating expenses and the amortization of deferred sales commissions were some of the positives.
We expect this acquisition to benefit Federated’s earnings going forward. However, the near-term outlook remains cautious and we remain circumspect before the markets score a strong and steady rebound and help increase business and generate client demand. Overall, Federated has the potential for substantial long term growth, given its fairly healthy balance sheet, firm cost-cutting initiatives and a diversified asset and product mix.
Read the full analyst report on “FII”
Read the full analyst report on “STI”
Zacks Investment Research
