(Bloomberg) -- TIAA-CREF, the manager of retirement accounts for teachers, agreed to buy Nuveen Investments from Madison Dearborn Partners LLC for $6.25 billion, including outstanding debt.

The transaction adds $221 billion in assets, bringing TIAA- CREF’s total to about $800 billion, according to a statement today from the New York-based company. Chicago-based Madison Dearborn purchased Nuveen in 2007, then the largest buyout of a U.S. asset manager, for $5.75 billion.

“This makes TIAA-CREF a real contender in the marketplace,” said Geoff Bobroff, a mutual fund consultant based in East Greenwich, Rhode Island. “They will have an interesting mix of businesses.”

The combined company would rank among the top-20 largest U.S. mutual-fund firms, data from research firm Morningstar Inc. show. TIAA-CREF had $72 billion in open-ended mutual fund assets as of Feb. 28 and Nuveen had $54 billion. Founded in 1918, TIAA- CREF is led by Roger Ferguson, the former U.S. Federal Reserve vice chairman.

Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. are the bankers for Nuveen Investments. UBS AG, Goldman Sachs Group Inc. and Moelis & Co. advised Nuveen’s management.

Madison Dearborn was advised by Morgan Stanley, Deutsche Bank AG and Royal Bank of Canada.

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