Morningstar announced it has agreed
to acquire Ibbotson Associates, the asset allocation research and
consulting firm, for $83 million in cash.
The deal is expected to close in the first quarter of 2006.
"Ibbotson's expertise in asset allocation and Morningstar's expertise in security selection and investment research is a powerful combination," says Joe Mansueto, chairman and chief executive officer of Morningstar. "Our companies share many similarities, and we have a firm commitment to helping investors reach their financial goals. I have long admired Ibbotson's work, and this acquisition is a logical move that will further strengthen Morningstar's institutional and advisor businesses."
Professor Roger Ibboston, founder of Ibbotson Associates, and Mike Henkel, president of the firm, plan to stay with the company.
"Ibbotson is a good fit with Morningstar's culture. Our missions are very similar; we are both focused on solving investor problems," Ibbotson said. "Joe and I both started our companies as boot-strap ventures, and we run our businesses with an entrepreneurial spirit. We have worked with each other for many years and I can't think of a better partner for our business."
Ibbotson's portfolio and asset management business, which constructs actively managed fund of funds offerings for financial institutions, is expected to expand Morningstar's existing investment management business.
Ibbotson currently has about $3.5 billion in assets under management for participants in 401(k) and other defined contribution plans and manages assets on behalf of several major retirement plan providers. About 12 million retirement plan participants have access to Morningstar's suite of retirement planning services through about 69,000 plan sponsors and 30 plan providers.
Ibbotson had $37.2 million in revenue for its fiscal year ending June 30, 2005.
"Ibbotson has developed a tremendous amount of original intellectual capital concerning asset allocation and advice solutions for investors," Henkel says. "Asset allocation alone is not enough to deliver a complete solution to investors. Morningstar's data, research, ideas, and global reach give us a chance to collaborate, combine the best of both our organizations, and bring our work to its fullest potential."
Morningstar says the acquisition will make it one of the largest independent providers of managed retirement accounts in the industry.
"This acquisition fits with several of Morningstar's growth strategies," says Mansueto. "We will immediately broaden our reach in the areas of investment consulting, investment management and managed retirement accounts. We're excited about joining forces with Ibbotson to expand our range of services to investors around the globe."