The Pendal Group Ltd (ASX: PDL) share price may receive a boost on news of an acquisition. How will this update affect the Pendal share price?
Pendal is now one of Australia’s largest fund managers, with more than $100 billion invested across its business. It competes with the likes of Magellan Financial Group Ltd (ASX: MFG) and Platinum Asset Management Ltd (ASX: PTM).
PDL share price
Pendal acquires a value-oriented fund
Pendal announced it has entered into an agreement to fully acquire Thompson, Siegel & Walmsley (TSW), a US-based value-oriented investment management company, for US$320 million (A$413 million).
TSW operates primarily in long-only equity (US and International) with US$23.6 billion (A$30.5 billion) of funds under management (FUM).
Pendal notes the price is valued at 7.6x 1H FY21 earnings before interest, tax, depreciation and amortisation (EBITDA explained).
Is TSW any good?
TSW holds six funds and four of them have a 4/5-star Morningstar rating and rank in the top quartile over the last three-year period.
TSW appears to have a strong work culture with an average tenure of 12 years among the investment team personnel.
The investment company has a team of 74 employees and 20 represent the investment team.
How will the acquisition be funded?
The US$320 million purchase price will be funded through a combination of equity, debt, and existing capital.
Equity will be raised through a fully underwritten placement and a share purchase plan for retail shareholders.
My thoughts
It appears TSW has a sound investment team with a proven track record. I think it’s important to focus on the quality of the investment team in such circumstances.
The quality of the investment team will drive future growth for Pendal.
Whilst it’s encouraging to see that this will double Pendal’s total addressable market in the US, but investors should consider whether this will generate a high level of return on capital (ROC explained).
If you are interested in other ASX growth shares, I’d recommend signing up for a free Rask account to gain access to our stock reports.
