The Italian bank UniCredit (MIL:UCG, Financial) is selling Pioneer Investments (Trades, Portfolio), the name under which Pioneer Global Asset Management S.p.A. and its subsidiaries operate and holds itself out to the public, to Amundi (XPAR:AMUN, Financial), an investment management company headquartered in Paris and a subsidiary of Crédit Agricole and Société Générale.
According to the agreement inked by UniCredit and the French asset management company, UniCredit will get 3.545 billion euros in cash ($3.742 billion) from Amundi for all the investing activities of Pioneer with the exclusion of the Polish investing activities.
Moreover, UniCredit will receive from Amundi a special dividend of 315 million euros before the closing of the transaction.
UniCredit said that “the transaction will generate a consolidated net capital gain of 2.2 billion euros in 2017 with an expected positive impact on the fully loaded Common Equity Tier 1 ratio of 78 bps.”
Following Basel III’s new standards, the regulatory capital ratio of the Common Equity Tier 1 –Â that is the part of the bank’s assets portfolio that includes equity instruments that don’t have any maturity and where the payment of dividends is left to the issuer's discretion –Â was raised from 4% to 4.5% in 2014 in response to an increased uncertainty in financial markets and global economy.
The banks have until 2019 to adjust their portfolio of assets’ CET1 ratio to 4.5%, calculated as a certain percentage depending on the credit risk and market risk that characterizes every asset of the bank’s portfolio.
“As part of the transaction, UniCredit and Amundi will form a strategic partnership for the distribution of asset management products underpinned by a 10-year distribution agreement for Italy, Germany and Austria. UniCredit will refocus on its distribution business model while retaining exposure to the commission income generated from the distribution of asset management products,” UniCredit said.
Amundi asset management will raise the necessary funds to finance the deal through the issuance of bond loans and the sale of new equity to investors.
“This transforming acquisition will strengthen significantly Amundi’s industrial project and reinforce its position as the European leader in asset management,” the company said.
In the first nine months, from the management of its assets Amundi generated net inflows of plus 39 billion euros, a 40.6% decrease on a year-over-year basis, signaling “a market environment still marked by strong risk aversion on the part of Amundi’s clients,” said Yves Perrier, CEO of the asset management company.
For the first nine months of 2015, the company generated net inflows of 65.8 billion euros from the management of assets valued 952 billion euros.
Net inflows from the retail segment and institutional segment decreased by 20.1% and 6.5%, From the first nine months of 2015 to the same period of 2016.
In the first nine months, retail and institutional segments generated solid results, driven by international networks and JVs (90% of the total retail segment) and institutionals and sovereigns (72.4% of the total institutional segment).
Approximately 85% of the total net inflows for the first nine months was generated by international medium and long-term assets (especially by the Chinese ones). Total value increased by 31% on a year-over-year basis.
The first nine months were also characterized by a 2.2% increase on a year-over-year basis in revenue, which was 1.234 billion euros, and a 0.7% decrease on a year-over-year basis in the cost-income ratio which reflects enhanced cost control on operating expenses.
Increase revenue and less operating expense brought net income to increase by 5.3% from the same period of the previous year “in line with the objectives announced at the time of the IPO,” the company says.
Disclosure: I have no positions in any securities mentioned in this article. I don’t have investments in any company mentioned in this article.
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