Waddell & Reed Financial (NYSE:WDR) may not be one of the most familiar companies, but WDR stock is still soaring on Thursday. Largely, the move comes as Macquarie announces its plans to acquire Waddell & Reed and expand its asset management business. So, what do you need to know about WDR stock today?
To start, what is Waddell & Reed? Well, operating for several decades, the company specializes in asset management for institutional and other private investors. And although it may not be well known, WDR stock does have a market capitalization of over $1.5 billion. This gives it some weight as it rockets up nearly 50% today.
With the news of the Macquarie acquisition in mind, here are 12 other things to know:
- Waddell & Reed has been around since 1937 and is based in Overland Park, Kanas.
- In addition to its main business in investment advising and asset management, Waddell & Reed helps distribute products for its business partners.
- These products include annuities, life insurance and other retirement products.
- Importantly, asset managers like Waddell & Reed have struggled during the novel coronavirus.
- Additionally, many investors have left actively managed funds for cheaper index funds.
- Overall, clients have removed $16 billion from Waddell & Reed funds since last year.
- On that note, WDR stock is down 30% over the last five years.
- However, Australian firm Macquarie still sees potential in Waddell & Reed.
- Macquarie is acquiring Waddell & Reed for $1.7 billion, paying nearly 13 times earnings before interest, taxes, debt and amortization.
- As a result, Macquarie will add about $68 billion in assets under management to its U.S. business.
- According to the Australian company, this deal is important to help it expand and give it the right size to compete against rivals.
- This deal values WDR stock at $25 apiece in cash.
What the WDR Stock News Means for Macquarie
Investors may be wondering why Macquarie would want to snap up Waddell & Reed at such a premium, especially if the market for actively managed funds has been struggling so much. Remember, even during the pandemic, we saw investors flee to passive funds from BlackRock (NYSE:BLK) and Vanguard.
Well, it turns out that Waddell & Reed could actually help Macquarie shore up its business and give it exposure to safer markets. Beyond its work with actively managed funds, Bloomberg reported that its broader asset management and annuity businesses are attractive. Importantly, this move also aligns with a broader initiative by Macquarie. Currently, the Australian company is working to shift toward more of these stable businesses. Right now, this means embracing things like annuities and moving away from traditional investment-banking solutions. During the first half of 2020, those stable businesses represented 70% of overall profit for Macquarie.
Although the deal is not a guaranteed win for Macquarie, it has WDR stock holders excited. After valuing shares at a 47% premium, it is not hard to understand why.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.