Morningstar Inc., Chicago, says it has agreed to acquire Ibbotson Associates Inc., Chicago, an investment strategy firm, for $83 million in cash, “subject to adjustments for working capital and certain make-whole payments.”
Morningstar hopes to close on the Ibbotson deal by March 31, 2006.
“This acquisition is a logical move that will further strengthen Morningstar’s institutional and advisor businesses,” says Morningstar Chairman Joseph Mansueto.
Morningstar is best known for rating mutual funds, and, these days, Ibbotson is probably best known for giving individual investors advice about allocating assets.
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But completing the Ibbotson deal also would make Morningstar one of the largest independent providers of managed retirement accounts in the industry, Morningstar says.
Morningstar, which went public in May, generated about $180 million in revenue in 2004. It has $226 million in managed retirement account assets and $1.3 billion in managed portfolios.
Ibbotson generates about $37 million in revenue per year, but it manages $3.5 billion in managed retirement account assets.
Financial services companies that recently have started using Ibbotson Associates to help customers allocate customers’ assets or actually allocate the assets include units of American International Group Inc., New York; MetLife Inc., New York; Nationwide Financial Services Inc., Columbus, Ohio; and Principal Financial Group Inc., Des Moines, Iowa.
Roger Ibbotson, a finance professor, founded the firm in 1977. Today, it has 150 employees and is known for efforts to help investors develop a long-term, allocation-based approach to investing.
Roger Ibbotson and Michael Henkel, president of Ibbotson Associates, plan to stay with Morningstar after the acquisition is completed, Morningstar says.
When Morningstar went public in May, it noted in its prospectus that three units–Morningstar Investment Services Inc., Morningstar Associates L.L.C. and mPower Advisors L.L.C.–are registered as investment advisors with the Securities and Exchange Commission.
The Morningstar Investment Services unit also is registered with the SEC as a broker-dealer.