Alliance Capital Management has agreed to sell its AllianceBernstein cash management business to Federated Investors in a deal that is expected to close by the third quarter of 2005, the firms said. According to the deal, AllianceBernstein will transfer $29 billion in assets from its 22 money market funds into 21 of Federateds money market funds.
Alliance CEO Lewis Sanders said the sale is the latest example of the firms refocus on growth equity, value equity and fixed income, as well as research. Federated will pay $25 million in cash up front and make yearly payments based on the amount of revenue its new venture generates.
"Adding new clients to Federateds substantial money market business gives us another opportunity for growth, and we expect that fund shareholders will benefit from the depth and breadth of Federateds substantial investment product array and customer-service capabilities," said J. Christopher Donahue, Federateds CEO and president.
Both companies also announced their third quarter earnings, with Alliance reporting a profit and Federated reporting a loss. For Alliance, third-quarter income of $153 million easily beat last years third-quarter total of $19 million. However, excluding the one-time charge that reduced profits by $146 million during the third-quarter of last year relating to the mutual fund scandal, profits were down by $12 million year over year. Assets under management were up in the quarter but the firm has lost $4.6 billion year to date.
As for Federated, the firm reported a 4% decrease in earnings, falling to $47 million in the third quarter down from $50.9 million during the same period last year. Assets under management for the firm, which stood at $194.1 billion a year ago, dipped to $177.6 billion, the company said.
The firm blamed recent interest rate hikes for some of its losses, and said it is adjusting to the changing landscape. "In a challenging interest rate environment, we continue to grow our customer base for cash management and to work with our clients to implement effective equity and fixed-income strategies," Donahue said.