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Here's Why Waddell & Reed Stock Is Soaring on Thursday

By Matthew Frankel, CFP® - Dec 3, 2020 at 10:58AM

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This long-established asset management firm is up nearly 50%.

What happened

The stock market was having a decent day on Thursday with most major averages showing modest gains, but asset management firm Waddell & Reed ( WDR ) was another story altogether. As of 10:30 a.m. EST, the company's stock had spiked higher by 49% on the day.

Now what

After 83 years in business and more than 30 as a publicly traded company, Waddell & Reed is being acquired. Australian investment banking and financial services company Macquarie Group ( MQBK.Y -0.47% ) announced that it has agreed to buy Waddell & Reed for $1.7 billion in an all-cash deal. This translates to an offer price of $25 per share, a premium of about 48% to the stock's closing price on Wednesday.

Man looking at laptop and cheering.

Image source: Getty Images.

Once the transaction is finalized, Macquarie Asset Management plans to sell Waddell & Reed's independent brokerage business to LPL Financial Holdings ( LPL 1.07% ) for $300 million.

Macquarie has been actively trying to expand its operations in recent years, and this deal will give it a much larger presence in the U.S. market.

So what

The deal is expected to close in mid-2021. Interestingly, after today's increase, Waddell & Reed is trading for slightly more than the $25 per share acquisition price. This indicates that investors are quite confident the deal will be able to close with no major issues, but it also implies virtually no upside potential from this point unless the terms of the deal are changed or another acquirer swoops in and offers even more.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Waddell & Reed Financial, Inc. Stock Quote
Waddell & Reed Financial, Inc.
WDR
LG Display Stock Quote
LG Display
LPL
$8.53 (1.07%) $0.09
Macquarie Group Limited Stock Quote
Macquarie Group Limited
MQBK.Y
$143.50 (-0.47%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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