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Victory Capital (VCTR) to Buy USAA Asset Management for $850M

Zacks Equity Research

In an effort to expand its investment platform in fixed income and solutions asset classes, Victory Capital Holdings, Inc. VCTR agreed to acquire USAA Asset Management Company. In addition to creating value for Victory Capital, the deal is also projected to be significantly accretive to earnings per share.

Following the announcement of the deal, shares of Victory Capital gained almost 20%.

Per the agreement, Victory Capital will pay nearly $850 million for the purchase. Along with this, it has the opportunity to make additional contingent payments, depending on future business performance. Notably, the transaction is expected to be financed through a combination of debt and cash.

David Brown, chairman and chief executive officer of Victory Capital stated, “The acquisition of USAA Asset Management Company is a strong diversifier for us with the addition of quality investment teams and products and provides us entry into a new distribution channel with a loyal member base. It increases our size and scale, enhances our ability to attract and retain top investment talent, and leverages our investments in critical components of our business, such as technology, operations, investment support and client service, across a broader base of assets.”

USAA Asset Management is a privately owned investment manager based in San Antonio, TX. It has a strong investment performance track record and a distinguished reputation for providing service to its members.

With this acquisition, Victory Capital plans expand its presence in the San Antonio region and further enhance investment services for members of USAA Asset Management. Victory Capital will be able to expand its Solutions Platform so as to include target date and target risk strategies, managed volatility mutual funds and active fixed income ETFs.

Closing of the deal is subject to regulatory and other customary approvals, including the approval of USAA mutual fund and ETF shareholders and board of trustees.

USAA Asset Management Company had $69.2 billion in assets under management (AUM) as of Sep 30, 2018. After the completion of the transaction, Victory Capital’s total AUM would be nearly $144.4 billion.

Victory Capital’s third-quarter 2018 results benefitted from higher revenues and growth in AUM. Moreover, the company experienced a decline in expenses during the quarter under review.

Shares of Victory Capital have lost 15.6% over the past year compared with 14.6% decline of the industry.

The stock currently has a Zacks Rank #3 (Hold).

Stocks Worth a Look

A few better-ranked stocks from the finance space are Community Trust Bancorp, Inc. CTBI, Origin Bancorp, Inc. OBNK and Reliant Bancorp, Inc. RBNC. Each of these stocks currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past 60 days, Community Trust has witnessed an upward earnings estimate revision of 1.6% for the current year. Its share price has increased 1% in the past year.

Origin Bancorp’s Zacks Consensus Estimate for the current year has been revised marginally upward over the past 60 days. Its shares have gained nearly 1.7% in the past 12 months.

Reliant Bancorp has witnessed an upward earnings estimate revision of 2.1% for the current year over the past 60 days. Its share price has increased nearly 1% in a year’s time.

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