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MassMutual Makes $5.7 Billion OppenheimerFunds Deal

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Massachusetts Mutual Life Insurance Company today announced a deal that could lead to a big increase in the company’s total capital.

MassMutual said it has agreed to sell control over its OppenheimerFunds asset-management unit to Invesco Ltd. for shares of Invesco common stock and Invesco preferred stock with a total current value of about $5.7 billion.

The Invesco common stock involved has a current value of $1.7 billion. The Invesco preferred stock has a current value of $4 billion.

MassMutual would end up with a 15.5% stake in Invesco. MassMutual would be Invesco’s biggest shareholder, and it would get to add a director to the Invesco board. The companies would have an ongoing partnership and “explore future strategic collaboration opportunities.”

Rumors about the deal have been circulating for at least three weeks. Bloomberg ran a story about the deal in September.

(Related: Invesco Could Buy MassMutual Asset Manager Unit)

MassMutual and Invesco said they hope to get the regulatory approvals and other approvals they need to complete the deal by June 30.

Why is MassMutual selling OppenheimerFunds?

Roger Crandall, MassMutual’s president, said in a statement that MassMutual would still be in a position to profit if OppenheimerFunds continues to do well.

“We look forward to participating in the future growth of the combined entity as a long-term partner and shareholder,” Crandall said.

The deal should help MassMutual invest in long-term projects and provide increased value for policy owners and customers, Crandall said.

MassMutual has been active in the long-term care insurance market, and it’s also possible that the deal could be at least partly related to concerns about LTCI unit capital needs. MassMutual has noted on its website that it has started the process of trying to increase LTCI premiums for at least some policyholders.

MassMutual has also been making deals that involves some of its international operations. In August 2017, MassMutual agreed to sell control of a unit based in Hong Kong, MassMutual Asia Ltd., to Yunfeng Financial Group Ltd. for about $1.7 billion.

(Related: Jack Ma-Backed Yunfeng to Buy MassMutual Unit for $1.7 Billion)

Just as the proposed deal for OppenheimerFunds would give MassMutual a chance to profit from OppenheimerFunds’ future earnings, the MassMutual Asia deal gave MassMutual a chance to participate in MassMutual Asia’s post-deal earnings.

What do rating agencies say about the OppenheimerFunds deal?

Analysts at Fitch Ratings have already weighed in.

Fitch analysts say that MassMutual looks very strong. Fitch analysts cite MassMutual’s career agency distribution system and strong whole life sales as strengths.

The analysts cite the company’s exposure to stock prices, interest rates, and the performance of hedging arrangements as possible sources of risk.

Fitch says the deals MassMutual has been making and planning should reduce the company’s exposure to international risk while helping it increase statutory capital by more than $5 billion.

Who are MassMutual, Oppenheimer Funds and Invesco?

MassMutual was founded in 1851 and is based in Springfield, Massachusetts.

The company is a mutual insurer, meaning that it is owned by its policyholders.

The company reported $137 million in net income for 2017 on $26 billion in revenue.

It ended 2017 with about $252 billion in assets and $17.4 billion in total adjusted capital, according to its 2017 annual report.

MassMutual’s OppenheimerFunds unit was founded in 1959. MassMutual acquired it from British and Commonwealth Holdings PLC in 1990.

The unit has about 2,000 employees and offices in New York, Dallas, Seattle, Denver and Rochester.

On Sept. 28, the unit had $246 billion in assets under management.

Invesco is a company that is registered in Bermuda but has its mailing address in Atlanta. The company has stock that trades on the New York Stock Exchange under the symbol IVZ.

The company has about 7,000 employees and “on-the-ground presence” of some kind in 25 countries.

The company reported $1.1 billion in net income for 2017 on $3.7 billion in revenue and

Invesco ended September with about $981 billion in assets under management.

— Read MassMutual Prepares to Build 17-Story Tower In Bostonon ThinkAdvisor.

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