Macquarie Acquisition Of Waddell & Reed
Macquarie I Acquisition of Waddell & Reed I macquarie.comTransaction SummaryTransaction RationaleWaddell & Reed CombinationAppendixAcquisition of Waddell & Reed SummaryAttractive opportunity with significant strategic benefits due to LPL Financial relationship and additionalplatform scale, resulting in a positive financial impact to Macquarie Asset Management (MAM) andMacquarie GroupTransactionsummary MAM is partnering with LPL Financial (LPL), a leading US wealth management firm, to jointly acquire Waddell & Reed Financial,Inc. (Waddell & Reed) a NYSE-listed US-based asset and wealth manager for total headline consideration of US1.7b Waddell & Reed has two businesses:i.an asset Management business (AM) with US68b¹ in assets under management (AUM) andii.a wealth Management business (WM) with US63b¹ in assets under administration (AUA) Macquarie would acquire all of the outstanding common shares of Waddell & Reed and, on completion, sell Waddell & Reed’swealth management platform to LPL for US300m plus excess net assets Headline acquisition multiple of 10x EV/EBITDA and pro forma of 6x EV/EBITDA post sell down of balance sheet assets,before the sale of the wealth management business and realisation of synergies² MAM and LPL to enter into strategic distribution partnership, with MAM becoming one of LPL’s top tier strategic assetmanagement partners Macquarie’s net asset funding requirement after sell-down of balance sheet assets and sale of the wealth management businessis estimated to be approximately US900m and regulatory capital requirement approximately US650m Expected to close in the mid-2021, subject to regulatory approvals, Waddell & Reed stockholder approval and other customaryclosing conditions1. As at 30 Sep 20. 2. Multiples subject to assumptions and risks in relation to future financial performance and our actual results may differ from these estimates.1
Macquarie I Acquisition of Waddell & Reed I macquarie.comTransaction SummaryTransaction RationaleWaddell & Reed CombinationAppendixTransaction RationaleConsistent with MAM’s strategic ambitions to continue to add scale and diversification to its business tobest serve its clients and partnersScale and increased platformrelevanceStrategic partnershipwith LPLValue creation for MacquarieShareholdersTop 251 activelymanaged, long-term,open-ended mutualfund manager by AUMin the US uponcompletion of acquisitionCombined business willhave increased scale anddiversification ofinvestment capabilitiesincreasing relevance tointermediary distributionpartnersLPL is a leading US retailinvestment advisory firmand independent brokerdealerPro forma EV/EBITDAmultiple of 6x post selldown of balance sheetassets, before sale of thewealth managementbusiness and realisation ofsynergies2Diversification ofMacquarie AssetManagement revenuestreamsUS wealth managementrepresents largest clientsegment in the globalAM universe and trendtowards rationalisation ofasset managerrelationshipsAddition ofcomplementaryinvestment capabilitiesin higher growth/marginasset classesStrategic distributionpartnership with MAM asone of LPL’s top tierstrategic assetmanagement partnersEPS and ROE accretive toMQG shareholdersfollowing integration period2Improves stability ofMAM’s earningsthrough increased basefees1. Source: Assets under management as of 30 Sep 20 - Based on data represented in Strategic Insight and Morningstar. Data includes ICI Method of Sales: Salesforce, Institutional and Retirement. Data excludes Variable Insurance Products, Closed End Funds, ETFs, passive mutual funds,Money Market Funds, Delaware Pooled Trusts, and Optimum Funds. Both Waddell & Reed and Macquarie Delaware are top 40 US active mutual fund managers by AUM as at 30 Sep 20. 2. These estimates are subject to assumptions and risks in relation to future financial performance andour actual results may differ from these estimates.2
Transaction SummaryMacquarie I Acquisition of Waddell & Reed I macquarie.comTransaction RationaleWaddell & Reed CombinationAppendixA Compelling CombinationWaddell & Reed today Founded in 1937 in Kansas City, Waddell & Reed has been serving thefinancial needs of families, individuals and businesses for more than 80 yearsFuture combination with MacquarieAsset Management(AUM USb)¹By Client ChannelBy Asset ClassAsset ManagementWealth Management4654653%32%68%34% Active portfolio management across avariety of asset classes utilizingproprietary fundamental researchdistributed to retail and institutionalclients under the Ivy Investmentumbrella National network of financial advisorsproviding comprehensive, personalfinancial planning services to clientsacross the US AUM: US68b¹ 1,300 advisors and advisorassociates 100 investment professionals acrossPMs, research and investment support Top strategies by AUM:‒ Science & Technology‒ Midcap Growth‒ Large Cap Growth‒ High Yield Fixed Income‒ International Core Equity1. As at 30 Sep 20.11%20%6869% AUA: US63b¹ 4,000 client accounts across advisoryand non-advisory 60% of client assets invested in Ivyfunds, with the balance in variableannuity and other insurance relatedproducts as well as unaffiliated ityFixed titutionalWealth Management (LPL)Unaffiliated RetailNotes: 1) Other includes multi-asset and money marketLong-term partnershipWealth Management3
AppendixSelection of pages fromMacquarie’s 1H21 result presentationon 6 November 2020 MACQUARIE 2020
Macquarie I Acquisition of Waddell & Reed I macquarie.comTransaction SummaryTransaction RationaleWaddell & Reed CombinationAppendixAbout MacquarieAnnuity-style activities 70%Net Profit ContributionMacquarie Asset Management(MAM) Top 501 global specialist asset managerwith A554.9b2 of assets undermanagement, diversified across regions,products, asset classes and investor types Provides investment solutions to clientsacross a range of capabilities, includinginfrastructure & renewables, real estate,agriculture, transportation finance, privatecredit, equities, fixed income and multiasset solutionsDiverse platform covering more than 30 market segments,with more than 200 products Delivers a range of tailoredspecialised asset financesolutions across a variety ofindustries and asset classes Commodity market lendingand financing providesclients with loans andworking capital financeacross a range ofcommodity sectorsincluding metals, energyand agriculture 30%Net Profit ContributionCommodities and Global Markets(CGM)Banking and Financial Services(BFS) Macquarie’s retail banking and financialservices business with total BFS deposits3of A74.4b2, loan and lease portfolio4 of A79.1b2 and funds on platform5of A89.3b2 Provides a diverse range of personalbanking, wealth management, businessbanking and vehicle finance6 products andservices to retail clients, advisers, brokersand business clientsMarkets-facing activities Integrated, end-to-endoffering across globalmarkets including equities,fixed income, foreignexchange, commoditiesand technology, media andtelecoms Provides clients withrisk and capital solutionsacross physical andfinancial marketsMacquarie Capital(MacCap)Global capability in: Advisory and capital raising services,investing alongside partners and clientsacross the capital structure, providingclients with specialist expertise, adviceand flexible capital solutions across arange of sectors Development and construction ofinfrastructure and energy projects and, inrelation to renewable energy projects, thesupply of green energy solutions tocorporate clients Equities brokerage, providing clients withaccess to equity research, sales, executioncapabilities and corporate access1H21 Net Profit ContributionMAMBFSCGMCGMMacCap 47% 14% 9% 38%( 8%)Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. All numbers in this presentation have been reclassified to reflect the transfer of Cash Equities from CGM to Macquarie Capital effective 1 Jun 20. 1. P&I Largest Money Managers2019 (published June 2020). 2. As at 30 Sep 20. 3. BFS deposits exclude corporate/wholesale deposits. 4. The loan and lease portfolio comprises home loans, loans to businesses, vehicle finance and credit cards. 5. Funds on platform includes Macquarie Wrap and Vision. 6. Includes generalplant & equipment.5
Transaction SummaryMacquarie I Acquisition of Waddell & Reed I macquarie.comTransaction RationaleWaddell & Reed CombinationAppendixMacquarie Asset ManagementOPERATING INCOME 5% A1,789m 3%ON 1H20ON 2H20NET PROFIT CONTRIBUTION A1,062m 5%MACQUARIE INFRASTRUCTUREAND REAL ASSETS (MIRA)MACQUARIE INVESTMENTMANAGEMENT (MIM) A139.8b in equity under management, down 6% on Mar 20 A350.9b in assets under management, down 8% on Mar 20 due topredominantly due to impacts from foreign exchange, partially offset bynew equity raised Raised A8.9b in new equity, up on 1H20. Raisings across allregions for a diverse range of funds, products and solutions acrossthe platformimpacts from foreign exchange and a reduction in contractualinsurance assets, partially offset by market movements Continued strong fund performance with the percentage of assetsunder management outperforming the three-year benchmarksincreasing from 69% in Mar 20 to 77%4 Invested A8.4b, broadly in line with 1H20, across 19 new investments Launched Delaware Wilshire Private Markets Fund, bringing privateON 1H20 1%ON 2H20 AUM1 A554.9b 7 %ON MAR 20MAM 47% including 7 infrastructure equity investments, 7 infrastructure debtinvestments and 5 real estate investmentsEquity proceeds of A0.9b from asset divestments2, a decreasecompared to 1H20 A24.1b of equity to deploy as at 30 Sep 20Final close of Macquarie Infrastructure Debt Sub-Investment Gradefund, which raised 730m through the fund and 425m in coinvestmentsSale of the Macquarie European Rail businessMacquarie AirFinance (50% owned by MQG) – continuing to work withairlines to provide relief in response to their revenue challenges, due toongoing stress in the airline industryNo.1 infrastructure investment manager globally3markets solutions to the US wholesale market Continued implementation of global operating platform - Aladdinplatform now live in all major locationsNote: Net profit contribution is management accounting profit before unallocated corporate costs, profit share and income tax. Chart is based on 1H21 net profit contribution from Operating Groups. 1. AUM at 31 Mar 20 has been restated to reflect an immaterial misstatement in total MAM AUMreported on 8 May 20. 2. Equity proceeds from asset divestments differs to the impact of divestments on reported EUM which captures a reduction of the original capital commitment at time of return of capital to investors. 3. IPE Real Assets (Jul/Aug 2020), measured by infrastructure assets undermanagement. 4. As at 30 Sep 20.6
Macquarie I Acquisition of Waddell & Reed I macquarie.comTransaction SummaryTransaction RationaleWaddell & Reed CombinationAppendix1H21 result: A985m down 32% on 1H20;down 23% on 2H201H21 Am2H20 Am1H20 Am1H21 v1H201H21 )(240)5*83%(4,266)(4,391)(4,480)5%3%Operating profit before income tax1,2531,6141,84032%22%Income tax it attributable to MGL shareholders9851,2741,45732%23%Annualised return on equity (%)9.512.716.442%25%Basic earnings per share A2.77 A3.62 A4.3036%23%Dividend per ordinary share A1.35 A1.80 A2.5046%25%Net operating income (excl. Credit and Otherimpairment charges)Net credit impairment chargesOther impairment (charges)/reversalsTotal operating expensesEffective taxrate1(%)Loss/(profit) attributable to non-controlling interests1. Calculation of the effective tax rate is after adjusting for the impact of non-controlling interests.7
Transaction SummaryMacquarie I Acquisition of Waddell & Reed I macquarie.comTransaction RationaleWaddell & Reed CombinationAppendixFinancial performanceOperating incomeProfit Am8,0006,0004,0002,0001H192H191H202H201H21 PROFIT A5,519m2,000 A985m 13 %1,500 32 %ON 1H201,000 8 %500ON 2H200ON 1H20 23 %ON 2H2001H211H19EPS5.00 Am1H21 OPERATING INCOME2H191H202H201H21DPS1H21 EPS A4.003.002.00 A2.77 36%3.00 46%ON 1H202.00ON 1H201.00 25% 23%1.001H21 DPS A4.00 A1.35ON 2H200.001H192H191H202H201H21ON 2H200.001H192H191H202H201H218
Transaction SummaryMacquarie I Acquisition of Waddell & Reed I macquarie.comTransaction RationaleWaddell & Reed CombinationAppendixAssets under management of A556.3b1AUM decreased 7% from A598.9b1 at 31 Mar 20Decrease due to impacts from foreign exchange and a reduction in contractual insurance assets, partially offset by MIM market movements andinvestment by MIRA-managed funds Ab6005004003002001000Mar 16Mar 17Mar 18Fixed incomeInfrastructure EquityMar 19Equities1. Includes MAM AUM of A554.9b and BFS AUM of A1.4b. 31 Mar 20 AUM has been restated to reflect an immaterial misstatement in total MAM AUM reported on 8 May 20.OtherMar 20Sep 20Real Estate9
1 Macquarie I Acquisition of Waddell & Reed I macquarie.com Transaction Summary Transaction Rationale Waddell & Reed Combination Appendix Attractive opportunity with significant strategic benefits due to LPL Financial relationship and additional platform scale, resulting in a positive financial impact
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