Franklin Resources Inc. is buying Putnam Investments from its Canadian owners in a bid to grow assets as traditional fund managers face pressure to consolidate and tap new markets.
Franklin Templeton will initially pay $925 million in shares and cash to acquire Putnam from Great-West Lifeco Inc., which is controlled by the Desmarais family's Power Corp. of Canada group.
Franklin, which managed $1.4 trillion at the end of April, has been on a deal spree, including buying two alternative-asset managers over the past two years to expand in scale and capabilities.
Mutual fund providers are facing pressure from investors' shift to cheaper index-tracking funds, forcing them to trim costs and find new categories of assets to manage.
Shares of Franklin fell 2.8% to $24.02 as of 9:50 a.m. in New York. Great-West shares were little changed in Toronto.
The deal also includes as much as $375 million in contingent payments tied to revenue growth from a partnership between the two sides, Franklin Templeton said in a statement Wednesday.
Great-West, one of Canada's largest life insurers and asset managers, will have a 6.2% stake in Franklin, most of which will be locked up for five years.
"This is a compelling transaction for Franklin Templeton, and we are excited about the numerous opportunities that will be unlocked by this long-term strategic partnership," Jenny Johnson, chief executive officer of Franklin Templeton, said in a statement.
