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.
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.
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.