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Invesco's planned $1.2 billion purchase of Guggenheim Investments' ETF business will help it expand its lineup of smart-beta ETFs -- and enhance its ability to compete, said CEO and President Martin L. Flanagan.
"Scale absolutely matters in this business," Mr. Flanagan said in an interview after the deal was announced on Sept. 28.
Invesco's Powershares ETF business is the fourth-largest in the U.S., with $129.2 billion in assets under management as of Sept. 12, Morningstar data show.
The purchase, which is expected to close in the second quarter of 2018, will add another $36.7 billion in AUM. It marks Invesco's second announced acquisition of an ETF provider in four months.
Mr. Flanagan said that few other asset managers besides Invesco could have made the deal work, because, without a substantial ETF platform, building "the plumbing" to merge ETF businesses would be too costly.
Even considering Invesco's existing ETF platform, an investor presentation released in conjunction with the announcement shows the company expects transaction and integration costs of up to $50 million in 2018 for merging the Guggenheim platform into its own.
In April, Invesco announced it was buying European ETF company Source, with $18 billion in ETF assets and another $7 billion in subadvised assets, from private equity firm Warburg Pincus. That deal has yet to formally close.
Invesco said in a news release its global ETF AUM will total $196 billion as of Aug. 31 with the acquisitions.
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