(Bloomberg) — TIAA-CREF agreed to buy Nuveen Investments from Madison Dearborn Partners LLC for $6.25 billion, propelling the manager of teachers’ retirement savings into the top 20 of U.S. mutual-fund firms.

The transaction price includes $4.56 billion in outstanding debt, according to the New York-based firm, which today announced the acquisition in a statement. Chicago-based Madison Dearborn purchased Nuveen almost seven years ago for $5.75 billion, in what was then the largest buyout of a U.S. asset manager.

“This makes TIAA-CREF a real contender in the marketplace,” said Geoff Bobroff, a mutual fund consultant based in East Greenwich, Rhode Island. “They will have an interesting mix of businesses.”

The transaction will help TIAA-CREF, led by former U.S. Federal Reserve vice chairman Roger Ferguson, expand mutual- funds assets and appeal to a broader set of individual investors. TIAA-CREF will add $221 billion in assets, bringing its funds under management to about $800 billion. The combined company would rank among the 20 largest U.S. mutual-fund firms, a list dominated by firms such as Fidelity Investments and Vanguard Group Inc., data from Morningstar Inc. show.

“We think this is very complimentary,” Robert Leary, head of TIAA-CREF’s asset-management unit, said today in an interview. “It also adds a very large distribution capability. They’re a powerhouse in the retail distribution world.”

Buyout boom

Madison Dearborn acquired Nuveen in November 2007, near the top of the buyout boom. Nuveen is the largest U.S. manager of closed-end funds and is also known for its offerings investing in municipal debt — two areas that were hurt industrywide during the 2008 financial crisis.

Nuveen’s star manager David Iben left in June 2012 to form his own company backed by hedge-fund manager Jeffrey Vinik, which prompted investor withdrawals from its Tradewinds stock- picking unit. Nuveen in November 2012 hired Robert Doll, a former BlackRock Inc. equity manager known for his annual market predictions, as chief equity strategist.

TIAA-CREF, founded in 1918, had $72 billion in open-end mutual fund assets as of Feb. 28 and Nuveen had $54 billion.

Ferguson, 62, was among those mentioned in a survey of economists last year as potential successors to former Federal Reserve Chairman Ben S. Bernanke. He has changed TIAA-Cref dramatically since taking over in April 2008, Burton Greenwald, a mutual fund consultant based in Philadelphia, said in an interview.

Building assets

“The company has really done a good job building the asset-management operation beyond its traditional client base,” said Greenwald in a telephone interview.

The firm has had strong performance in mutual funds said Greenwald, which it has used to transform itself into a bigger player in the retirement business. The deal will give TIAA-CREF access to distribution among brokers and advisors, an area where it has traditionally been weak.

Nuveen will remain a distinct unit within TIAA-CREF retaining its brand name and its own management, Ferguson said in an interview. He also said the deal wouldn’t change the nature of TIAA-CREF mission.

“We will continue to single-mindedly focus on the not-for-profit sector,” Ferguson said in an interview. “This isn’t a consolidation or a synergy play. We look at it as a very smart investment.”

Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. are the bankers for Nuveen Investments. UBS AG, Goldman Sachs Group Inc. and Moelis & Co. advised Nuveen’s management. Lazard Ltd. served as lead adviser to TIAA-CREF.

Madison Dearborn was advised by Morgan Stanley, Deutsche Bank AG and Royal Bank of Canada.

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.