Victory Capital (NASDAQ:VCTR) (the “Company”) today announced that
it has entered into a definitive purchase agreement to acquire
Harvest Volatility Management, LLC (“Harvest”). Harvest, which had
approximately $12 billion in assets under management (AUM) as of
July 31, 2018, is a leader in derivative asset management,
specializing in yield enhancement overlay, risk reduction,
alternative beta and absolute return investment strategies. Based
on AUM for both firms as of July 31, 2018, Victory Capital would on
the closing of the transaction have approximately $75 billion in
firmwide AUM. This includes approximately $16 billion, or 21% of
total AUM, in its Solutions Platform strategies.
Harvest, which is based in New York City, was
founded in 2008 by Chief Executive Officer and Portfolio Manager
Richard L. Selvala, Jr. and Managing Partner and Chief Risk Officer
Curtis F. Brockelman, Jr. Harvest has established a strong track
record in managing strategies that enhance yield and reduce asset
class risk exposures. Client demand for the firm’s strategies has
been strong, resulting in meaningful growth in AUM since the firm’s
inception. Harvest was recently named 2017 “Overlay Manager of the
Year” by EQDerivatives.
Victory Capital’s integrated multi-boutique
business model will enable Harvest to continue to employ its
structured and disciplined investment process while remaining an
independent brand. Harvest’s seasoned investment team will continue
to leverage its proprietary technology platform, which supports its
analytic, trading and risk management functions.
“Harvest offers a cutting-edge suite of
strategies that are designed to provide investors with risk-managed
sources of income, absolute return and varying levels of market
exposure,” said David Brown, Chairman and Chief Executive Officer
of Victory Capital. “The addition of Harvest as our 10th Investment
Franchise aligns squarely with our stated acquisition strategy. The
firm is a strong organic grower with highly specialized investment
capabilities, which are outcome-oriented, highly customizable and
address a specific need in client portfolios.”
“We are excited to become part of Victory
Capital’s platform, with its substantial operational resources,
highly complementary distribution network, and track record of
supporting boutique investment firms,” said Mr. Selvala. “As
always, our team will continue to seek to generate attractive
risk-adjusted returns for our clients.”
Victory Capital and Harvest are both committed
to employee ownership as a means to ensure alignment with current
and future clients. Following the acquisition, Harvest’s senior
management will be meaningful equity investors in Victory Capital.
They also will continue to be significant investors in the
strategies that they manage.
Mr. Brockelman added, “Harvest and Victory
Capital share a strong entrepreneurial culture and commitment to
technology and product innovation. We look forward to leveraging
the Victory Capital team’s expertise and capabilities as we
evaluate attractive opportunities and solutions for our
clients.”
The transaction, which is expected to be
accretive to earnings per share, will be financed through a
combination of debt, equity and cash on the balance sheet, with the
potential for an earn-out, payable to the sellers, over time if
certain growth objectives are met. The acquisition is expected to
close by the end of the first quarter of 2019, and is subject to
regulatory and other customary approvals, conditions and consents,
including approval by Harvest’s clients.
Investor Conference Call
Victory Capital will host a conference call and
webcast at 10:00 a.m. Eastern Time today, September 24, 2018, to
discuss this transaction. The call can be accessed via telephone at
866-465-5145 (domestic) or 409-220-9945 (international). Please
reference the Victory Capital Conference Call.
A recorded replay of the conference call will be
available shortly after the conclusion of the live call and can be
accessed through October 8, 2018 by dialing (855) 859-2056
(domestic) or (404) 537-3406 (international), and entering the
Conference ID Number 3198266.
The slide presentation and webcast of the
conference call can be accessed on the Events and Presentations
page of the Victory Capital’s investor relations website at
https://ir.vcm.com.
RBC Capital Markets and Barclays Capital Inc.
served as financial advisors and Willkie Farr & Gallagher LLP
acted as legal advisor to Victory Capital in this transaction.
Seward & Kissel LLP acted as legal advisor to Harvest
Volatility Management, LLC. About Victory
Capital
Victory Capital is a global investment
management firm operating a next-generation, integrated
multi-boutique business model with $63.2 billion in assets under
management as of July 31, 2018.
Victory Capital’s differentiated model is
comprised of nine Investment Franchises, each with an independent
culture and investment approach. Additionally, the Company offers a
rules-based Solutions Platform, featuring the VictoryShares ETF
brand, as well as custom and multi-asset class solutions. The
Company’s Investment Franchises and Solutions Platform are
supported by a centralized distribution, marketing and operational
environment, in which our investment professionals can focus on the
pursuit of investment excellence.
Victory Capital provides institutions, financial
advisors and retirement platforms with a variety of asset classes
and investment vehicles, including separately managed accounts,
collective trusts, mutual funds, ETFs, UCITs and UMA/SMA
vehicles.
For more information, please visit www.vcm.com.
About Harvest Volatility Management
Founded in 2008, Harvest Volatility Management
is one of the world’s leading derivative asset management firms
with approximately $12 billion in assets under management as of
July 31, 2018. Harvest is comprised of an expert team with many
decades of experience advising on, structuring, and managing
volatility and option related strategies. To learn more about the
firm, please visit www.hvm.com.
FORWARD-LOOKING
STATEMENTS
This press release may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements may include, without
limitation, any statements preceded by, followed by or including
words such as “target,” “believe,” “expect,” “aim,” “intend,”
“may,” “anticipate,” “assume,” “budget,” “continue,” “estimate,”
“future,” “objective,” “outlook,” “plan,” “potential,” “predict,”
“project,” “will,” “can have,” “likely,” “should,” “would,” “could”
and other words and terms of similar meaning or the negative
thereof. Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors beyond Victory
Capital’s control, as discussed in Victory Capital’s filings with
the SEC, that could cause Victory Capital’s actual results,
performance or achievements to be materially different from the
expected results, performance or achievements expressed or implied
by such forward-looking statements.
Although it is not possible to identify all such
risks and factors, they include, among others, the following:
reductions in AUM based on investment performance, client
withdrawals, difficult market conditions and other factors; the
nature of the Company’s contracts and investment advisory
agreements; the Company’s ability to maintain historical returns
and sustain its historical growth; the Company’s dependence on
third parties to market its strategies and provide products or
services for the operation of its business; the Company’s ability
to retain key investment professionals or members of its senior
management team; the Company’s reliance on the technology systems
supporting its operations; the Company’s ability to successfully
acquire and integrate new companies; the concentration of the
Company’s investments in long-only small- and mid-cap equity and
U.S. clients; risks and uncertainties associated with non-U.S.
investments; the Company’s efforts to establish and develop new
teams and strategies; the ability of the Company’s investment teams
to identify appropriate investment opportunities; the Company’s
ability to limit employee misconduct; the Company’s ability to meet
the guidelines set by its clients; the Company’s exposure to
potential litigation (including administrative or tax proceedings)
or regulatory actions; the Company’s ability to implement effective
information and cyber security policies, procedures and
capabilities; the Company’s substantial indebtedness; the potential
impairment of the Company’s goodwill and intangible assets;
disruption to the operations of third parties whose functions are
integral to the Company’s ETF platform; the Company’s determination
that Victory Capital is not required to register as an "investment
company" under the 1940 Act; the fluctuation of the Company’s
expenses; the Company’s ability to respond to recent trends in the
investment management industry; the level of regulation on
investment management firms and the Company’s ability to respond to
regulatory developments; the competitiveness of the investment
management industry; the dual class structure of the Company’s
common stock; the level of control over the Company retained by
Crestview GP; the Company’s status as an emerging growth company
and a controlled company; and other risks and factors listed
elsewhere in the Company’s filings with the SEC.
Such forward-looking statements are based on
numerous assumptions regarding Victory Capital’s present and future
business strategies and the environment in which it will operate in
the future. Any forward-looking statement made in this press
release speaks only as of the date hereof. Except as required by
law, Victory Capital assumes no obligation to update these
forward-looking statements, or to update the reasons actual results
could differ materially from those anticipated in the
forward-looking statements, even if new information becomes
available in the future.
INVESTOR RELATIONS WEBSITE
Victory Capital may use the Investor Relations
section of its website, https://ir.vcm.com, to disclose material
information to investors and the marketplace as a means of
disclosing material, non-public information and for complying with
disclosure obligations under Regulation Fair Disclosure (“Reg FD”).
Victory Capital encourages investors, the media and other
interested parties to visit its investor relations website
regularly.
Contacts
Investors:Lauren Crawford,
310-622-8239lcrawford@finprofiles.com
Media:For Victory Capital: Tricia Ross,
310-622-8226tross@finprofiles.com
For Harvest:Gasthalter & Co.Jonathan Gasthalter/Kevin
FitzGerald(212) 257-4170
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