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Adds comprehensive financial planning and dedicated in-person
advisors at over 125 locations
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Leverages Financial Engines’ technology platform to provide
high-touch services at scale
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Expect approximately 25% accretion to 2016 adjusted earnings per
share and higher growth
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Warburg Pincus to become approximate 12.5% Financial Engines
stockholder and join board
Financial Engines (NASDAQ:FNGN), a leading independent investment advisor1,
today announced that it has signed a definitive agreement to acquire The
Mutual Fund Store, L.L.C. (“The Mutual Fund Store”), a prominent
nationally-branded independent Registered Investment Adviser, from
Warburg Pincus and management for total consideration of approximately
$560 million, including cash and stock. The transaction is expected to
produce 2016 earnings per share accretion of approximately 25%, assuming
the transaction closes late in the first quarter of 2016, and to
increase the longer-term growth rate of the combined company. Based on
the terms of the transaction, Warburg Pincus is expected to become
Financial Engines’ largest stockholder with a beneficial ownership of
approximately 12.5% following the closing of the transaction and Michael
Martin, managing director of Warburg Pincus, will be appointed to
Financial Engines’ board of directors upon closing.
The acquisition will enable Financial Engines to expand its independent
advisory services to 401(k) participants through comprehensive financial
planning and the option to meet face-to-face with a dedicated financial
advisor at one of more than 125 national locations. The Mutual Fund
Store is a fast-growing Registered Investment Adviser providing
personalized financial planning and objective, fiduciary advice through
advisors in locations across the United States. It has approximately 345
employees, approximately 84,000 accounts at about 39,000 households and
over $9.8 billion in assets under management, as of October 31, 2015.
Strategic Rationale
As a result of the acquisition, Financial Engines intends to expand its
independent advisory services for 401(k) participants through The Mutual
Fund Store’s comprehensive financial planning and in-person advisors
powered by Financial Engines’ scalable advice technology. Financial
Engines believes this will deliver:
• Greater usage and retention of Financial Engines’ services
• Expanded market opportunities to help 401(k) participants with more
complex needs
• Significant earnings per share accretion
• Strong synergies and higher future growth
“We are excited to meet the growing demands of our customers and help
401(k) plan participants with their complete financial picture,” said
Lawrence (Larry) Raffone, president and chief executive officer of
Financial Engines. “By leveraging Financial Engines’ scalable advice
technology to power The Mutual Fund Store’s services and in-person
advisors, we believe we will be able to make high-quality investment
advice and comprehensive financial planning available to everyone with
access to our services through their employer. This acquisition advances
our vision to provide independent advisory services to more people and
we believe will also fuel significant future growth.”
“We are thrilled to join forces with Financial Engines to provide
comprehensive advisory services through the workplace,” said John Bunch,
chief executive officer of The Mutual Fund Store. “This transaction
marks an exciting new chapter for our organization and for the advisory
industry. We believe this powerful combination, based on our shared
commitment to providing independent, objective advice, will benefit the
customers we serve and accelerate growth opportunities for the combined
entity.”
“We believe the combination of Financial Engines and The Mutual Fund
Store uniquely positions the combined entity to take advantage of a
growing opportunity to help millions of individuals reach their
financial goals with objective, fiduciary advice,” said Michael Martin,
managing director of Warburg Pincus. “We look forward to becoming a
stockholder of Financial Engines and working closely with Larry Raffone
and the rest of the management team.”
Outlook
For the company, post-acquisition, based on financial markets remaining
at November 2, 2015 levels, through all of 2016, and taking into account
an anticipated closing of the acquisition of The Mutual Fund Store in
the first quarter of 2016, Financial Engines estimates its 2016 revenue
will be in the range of $403 million and $410 million and 2016 non-GAAP
adjusted EBITDA will be in the range of $125 million to $130 million.
Under typical market conditions, Financial Engines estimates that 2016
revenue will be in the range of $419 million to $426 million and
non-GAAP adjusted EBITDA will be in the range of $137 million to $142
million. We expect that any synergies will be realized beginning in
2017, and beyond.
“We believe the acquisition to be significantly accretive to adjusted
earnings per share in fiscal year 2016. Importantly, post-closing we
expect to remain debt free and we expect to generate significant free
cash flow that will enable us to continue to invest in the business and
drive growth initiatives,” said Ray Sims, chief financial officer of
Financial Engines.
Transaction Details
The total transaction purchase consideration includes approximately $250
million in cash and 10 million shares of Financial Engines common stock.
The combined company will be debt free following the transaction.
Based on the common stock portion of the transaction, Warburg Pincus
will receive Financial Engines common shares representing approximately
12.5% of the pro forma shares outstanding. Concurrent with the closing
of the acquisition, Michael Martin, Managing Director of Warburg Pincus
will be appointed to serve on Financial Engines’ board of directors.
The transaction is expected to close in the first quarter of 2016 and is
subject to regulatory approvals and other customary closing conditions.
DBO Partners acted as financial advisor to Financial Engines, and
Pillsbury Winthrop Shaw Pittman provided legal counsel. JP Morgan acted
as financial advisor and Wachtell, Lipton, Rosen & Katz provided legal
counsel to Warburg Pincus.
Conference Call
Financial Engines will host a conference call to discuss this
transaction as well as its third quarter 2015 financial results today at
5:00 p.m. ET. The live webcast and presentation can be accessed from the
Company's investor relations website at www.financialengines.com.
The conference call can also be accessed live over the phone by dialing
(888) 348-6435, or (412) 902-4238 for international callers. A replay
will be available beginning one hour after the call and can be accessed
from the Company’s investor relations website, or by dialing (877)
870-5176, or (858) 384-5517 for international callers; the conference ID
is 10074933. The conference call replay will be available until November
12, 2015.
About Financial Engines
Financial Engines is a leading independent investment advisor. We help
people make the most of their retirement assets by providing
professional investment management and advice.
Headquartered in Sunnyvale, CA, Financial Engines was co-founded in 1996
by Nobel Prize-winning economist William F. Sharpe. Today, we offer
retirement help to more than nine million employees across over 650
companies nationwide (including 142 of the Fortune 500). Our investment
methodology, combined with powerful online services, dedicated advisor
center and personal attention allow us to help more Americans get on the
path to a secure retirement.
For more information, please visit www.financialengines.com.
All advisory services provided by Financial Engines Advisors L.L.C., a
federally registered investment advisor and wholly-owned subsidiary of
Financial Engines, Inc. Financial Engines does not guarantee future
results.
About The Mutual Fund Store
Founded in 1996 by Adam Bold, The Mutual Fund Store, a Kansas City-based
company is the first and largest nationally-branded investment advisor
focusing on the mass affluent customer. By specializing in full service
financial planning, The Mutual Fund Store is able to differentiate
itself from other investment advisors by providing a level of fee-only,
independent investment advice that is often available to only the very
wealthy. Clients work with their advisor one-on-one to get tailored
investment advice with a focus on individual needs and risk tolerance,
to save for retirement, a new home or a child's college education. The
Mutual Fund Store with assets under management over $9.8 billion
delivers investment advice to over 39,000 households across 129
locations in the U.S. For more information, please visit www.MutualFundStore.com
About Warburg Pincus
Warburg Pincus is a leading global private equity firm focused on growth
investing. The firm has more than $35 billion in assets under
management. The firm's current portfolio of more than 120 companies is
highly diversified by stage, sector and geography. Warburg Pincus is an
experienced partner to management teams seeking to build durable
companies with sustainable value. Founded in 1966, Warburg Pincus has
raised 14 private equity funds, which have invested more than $50
billion in over 720 companies in more than 35 countries. The firm is
headquartered in New York with offices in Amsterdam, Beijing, Hong Kong,
London, Luxembourg, Mauritius, Mumbai, San Francisco, Sao Paulo and
Shanghai. For more information, please visit http://www.warburgpincus.com.
Forward-Looking Statements
This press release and its attachments contain forward-looking
statements that involve risks and uncertainties. These forward-looking
statements may be identified by terms such as “plan to,” “designed to,”
“will,” “can,” “expect,” “estimates,” “believes,” “intends,” “may,”
“continues,” “to be” or the negative of these terms, and similar
expressions intended to identify forward-looking statements. These
forward-looking statements include, but are not limited to, statements
regarding the pending acquisition of The Mutual Fund Store, including
the anticipated timing, costs, impact and benefits thereof, the
expectation that the acquisition will be significantly accretive to
Financial Engines’ adjusted earnings per share in fiscal year 2016 and
will increase the longer-term growth rate of the combined company,
Warburg Pincus and its expected ownership interest in Financial Engines
post closing, the belief that the acquisition will enable Financial
Engines to expand its independent advisory services to 401(k)
participants and that this in turn will deliver increased customer
satisfaction and thus driving greater usage and retention of Financial
Engines’ services, expanded market opportunities, and strong synergies
and higher future growth, the expectation that the acquisition will
benefit customers served by, and accelerate growth opportunities for,
the combined entity, Financial Engines’ expectation to remain debt-free
post-closing and to generate significant free cash flow to enable
continued investment in the business and drive growth initiatives,
Financial Engines’ expected financial performance and outlook, including
factors which may impact its outlook, benefits of its services, and
growth strategy, and the benefits of its non-GAAP financial measures.
These statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or
achievements to differ materially from those expressed or implied by
such forward-looking statements, and reported results should not be
considered as an indication of future performance. These risks and
uncertainties include, but are not limited to, risks related to the
pending acquisition of The Mutual Fund Store, including our ability to
complete and to realize the anticipated benefits of the transaction in a
timely manner or at all, and to successfully integrate The Mutual Fund
Store’s business with Financial Engines, the timing of completion of the
transaction, costs associated with the transaction, and the potential
impact of the transaction, or announcement thereof, and reaction
thereto, on our business, operating results and financial condition, our
reliance on fees earned on the value of assets we manage for a
substantial portion of our revenue, the impact of the financial markets
on our revenue and earnings, unanticipated delays in rollouts of our
services, our ability to increase enrollment, our ability to correctly
identify and invest appropriately in growth opportunities, our ability
to introduce new services and accurately estimate the impact of any
future services on our business, the risk that the anticipated benefits
of our investments in these services or in growth opportunities may not
outweigh the resources and costs associated with these investments or
the liabilities associated with the operation of these services, our
relationships with plan providers and plan sponsors, the fees we can
charge for our Professional Management service, our reliance on accurate
and timely data from plan providers and plan sponsors, system failures,
errors or unsatisfactory performance of our services, our reputation,
our ability to protect the confidentiality of plan provider, plan
sponsor and plan participant data and other privacy concerns,
acquisition activity involving plan providers or plan sponsors, our
ability to compete, our regulatory environment, and risks associated
with our fiduciary obligations. More information regarding these and
other risks, uncertainties and factors is contained in the Company’s
Form 10-K for the year ended December 31, 2014 as filed with the SEC,
and in other reports filed by the Company with the SEC from time to
time. You are cautioned not to unduly rely on these forward-looking
statements, which speak only as of the date of this press release. All
information in this press release and its attachments is as of the date
stated or November 5, 2015 and unless required by law, Financial Engines
undertakes no obligation to publicly revise any forward-looking
statement to reflect circumstances or events after the date of this
press release or to report the occurrence of unanticipated events
Our investment advisory and management services are provided through our
subsidiary, Financial Engines Advisors L.L.C., a federally registered
investment advisor. References in this press release to “Financial
Engines,” “our company,” “the Company,” “we,” “us” and “our” refer to
Financial Engines, Inc. and its consolidated subsidiaries during the
periods presented unless the context requires otherwise.
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1 For independence methodology and ranking, see
InvestmentNews RIA Data Center.
(http://data.investmentnews.com/ria/).
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