November 14, 2017

A brief commentary on the acquisition by Wisdom Tree of the non-ETF Business of ETF Securities

by Detlef Glow

ETF Securities Limited announced on November 13, 2017 that it will sell its European exchange-traded commodity, currency, and short-and-leveraged business to Wisdom Tree Investment, Inc. for approximately US$611 million. In more detail the business being sold comprises all the European operations (including staff members), excluding GO UCITS ETF Solutions—the ETF platform of ETF Securities. Even though the deal constitutes a definitive agreement, it is still subject to regulatory approval; both parties aim to close the transaction in first quarter 2018.

The agreed terms for the deal contain US$253 million in cash and 30 million Wisdom Tree shares. The cash for the transaction is funded by newly issued debt (US$200 million) and cash on hand (US$53 million). The share part of the deal is even more interesting, since the 30 million shares represent around 18% of the outstanding common shares of Wisdom Tree, but the voting rights associated with the share consideration of the deal will be capped at 9.99%. In addition, the stock consideration is split into 15,250,000 common shares and 14,750 shares of a new class of Series A non-voting preferred shares that are convertible into an aggregate of 14,750,000 common shares, subject to certain restrictions.

From my point of view this agreement makes sense, since Wisdom Tree already owns Boost ETP and will therefore expand its existing footprint in the structured-notes segment from being a rather niche player to becoming a leading promoter of ETPs in Europe. In addition, it seems the combined forces of ETF Securities’ ETP platform and Boost ETP should help Wisdom Tree scale and diversify its business with exchange-traded notes, since Boost ETP held on November 10, 2017, approximately US$936.8 million in assets under management in 92 products, while the ETF Securities product range of 307 ETNs had approximately US$18.0 billion.

The views expressed are the views of the author, not necessarily those of Thomson Reuters.

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