Call it a marriage of growth and value.
Alliance Capital Management (AC), whose Alliance Tech fund has been a star performer in recent years, agreed Tuesday to spend $3.5 billion to buy Sanford C. Bernstein Inc., a money manager known for its research and investments in undervalued shares.
Alliance would pay Sanford Bernstein $1.5 billion in cash and 40.8 million partnership units, equivalent to shares in Alliance. The new company would have $475 billion in assets under management, with 2,600 institutional and 15,000 individual clients.
Bernstein is known for its research, which was ranked fifth in last year’s annual survey of Wall Street analysts by Institutional Investor magazine.
“Bernstein has as strong a reputation for research as any firm in the business, and they have a reputation as value investors,” said Burton Greenwald, head of BJ Greenwald Associates, a consulting firm in Philadelphia. “That combination is a natural complement to Alliance.”
Alliance has benefited from its “growth” funds, which focus on shares of companies whose sales and earnings are increasing rapidly. In the 1990s, investments in growth companies in the tech and telecom industries have tended to outperform shares of firms that are cheap based on their projected earnings.
Alliance’s biggest investor is French insurer AXA, which owns about 57% of Alliance Capital. The acquisition of Bernstein--which started in 1967 catering to high-net-worth individuals and still manages about $32 billion from wealthy clients--didn’t come cheap.
But, Greenwald said, “High net worth is what everyone is attracted to. That’s where all the investment managers are focusing.”
Alliance Capital’s shares, which fell $1.63 on Tuesday to close at $48.50 on the New York Stock Exchange before the deal was announced, are up 62% this year.