WisdomTree slides as ETF Securities deal seen lowering takeover odds
Shares of WisdomTree (WETF) are sliding after it announced that it is acquiring certain assets of ETF Securities and is adjusting its quarterly dividend to 3c per share. Commenting on the deal, Goldman Sachs analyst Alexander Blostein argued that it reduces the probability of WisdomTree being acquired in the near-term. ACQUISITION OF ASSETS: WisdomTree Investments announced that it has entered into a definitive agreement to acquire ETF Securities' European exchange-traded commodity, currency and short-and-leveraged business, which includes $17.6B of assets under management as of November 9, 2017. With the addition of the acquired business, WisdomTree's assets under management would total approximately $66B globally on a pro-forma basis, as of November 9. Under the terms of the agreement, WisdomTree will exchange $253M of cash and stock consideration of 30M WisdomTree shares for the acquired business. Based on Friday's market close price, the total consideration is valued at $611M. Excluding one-time transaction and integration costs, WisdomTree expects that the acquisition will be immediately accretive to its earnings per share. Subject to regulatory approval and other customary closing conditions, the transaction is expected to close in late Q1 of 2018. LOWER DIVIDEND: Meanwhile, as part of the acquisition deal announcement, WisdomTree said it will adjust its quarterly dividend to 3c per share, starting with the dividend scheduled for payment in the first quarter of 2018. "This dividend level appropriately balances our new capital structure and allows for the pursuit of future growth opportunities while continuing to return capital to shareholders," the company stated. REDUCED ACQUISITION PROBABILITY: Commenting on the news, Goldman Sachs' Blostein told investors that as part of the proposed deal, WisdomTree will assume $200M of debt, which management stated will be a permanent addition to the capital structure and that the company is unlikely to meaningfully deleverage the balance sheet over time. While the analyst acknowledged that the announced acquisition gives WisdomTree increased scale in Europe, diversified AUM and is expected to be accretive to earnings, he noted that it would reduce the probability of WisdomTree being acquired in the near-term. PRICE ACTION: In late morning trading, shares of WisdomTree have dropped about 6.5% to $11.17.