Shares of Financial Engines Inc. (NASDAQ:FNGN) are up by more than 32% as of 12:00 p.m. EDT after the company announced it would be acquired by a private equity group. Funds affiliated with Hellman & Friedman will purchase it for $45 per share, valuing it at just over $3 billion.
Hellman & Friedman intends to combine the company with one of its portfolio companies, Edelman Financial Services, an independent financial planning and investment management shop. The combined company will have over $190 billion in assets under management.
Financial Engines' business revolves around its relationships with more than 750 employers who use it for 401(k) services. Scale remains the name of the game, as financial advisors are increasingly competing with low-cost alternatives, including robo-advisor services and target-date funds, and dealing with fee pressure across the industry.
In a document sent to employees, Financial Engines said that it anticipates that "merging with Edelman will advance our strategy of becoming the primary advisor for everyday Americans." Financial Engines reported that half of its clients had an account balance of less than $69,000 in its first-quarter earnings presentation.
At a recent price of approximately $44.80 per share, Wall Street is valuing Financial Engines in such a way that suggests it sees little risk that the deal falls through. Shares trade at a sub-1% discount to the $45 per share acquisition price, implying this deal is as good as done.
Financial Engines is slated to report its results for its first-quarter earnings after the market close on May 9. It expects the buyout to close in the third quarter, pending shareholder approval.