On Friday, B.Riley raised the share price target for Victory Capital Holdings, Inc. (NASDAQ:VCTR) to $57 from $48, while maintaining a Buy rating.
The adjustment comes in the wake of the recently announced memorandum of understanding (MOU) for the acquisition of Amundi US by Victory Capital, initially detailed in a note on April 16, 2024.
The acquisition is expected to close towards the end of 2024 and is projected to be "low double-digit accretive by the end of year one." Post-expense savings, Victory Capital is acquiring Amundi US at an estimated 4-5 times EBITDA multiple.
This transaction is set to increase Victory Capital's assets under management (AUM) by 75%, bringing the total to approximately $275 billion, making Amundi US Victory Capital's largest subsidiary.
The deal is also anticipated to enhance Victory Capital's scale and presence in the asset management sector. With 75% of Amundi's assets ranked as 4- or 5-star, Victory Capital will gain a stronger position in fixed income, which represents over half of Amundi's AUM, and in international markets. Additionally, a 15-year reciprocal distribution agreement will allow Victory Capital to leverage Amundi's vast international reach to potentially boost future flows.
B.Riley highlighted the strategic value of the acquisition, noting that Victory Capital can now focus its resources on domestic mergers and acquisitions instead of developing international channels. The firm's balance sheet is expected to become more flexible post-deal, with leverage reducing to approximately 1.4 times, providing room for another significant transaction and continued share buybacks.
In light of these developments, B.Riley has increased its FY25 earnings per share (EPS) estimate for Victory Capital from $6.31 to $6.50 and introduced an FY26 EPS forecast of $7.45.
InvestingPro Insights
Victory Capital Holdings, Inc. (NASDAQ:VCTR) has shown a robust financial performance with a market capitalization of $2.96 billion and a healthy P/E ratio of 12.52 based on the last twelve months as of Q4 2023. The company's commitment to shareholder returns is evident, with a significant dividend growth of 34.0% and a current yield of 2.92%, reflecting a strong income-generating potential for investors. Additionally, Victory Capital's strategic moves have been well-received by the market, as evidenced by the stock trading near its 52-week high and delivering impressive returns, including a 57.23% one-year price total return as of the latest data.
Investors seeking further insights into Victory Capital's performance and future prospects can consider these InvestingPro Tips: the company has a history of raising its dividend for 5 consecutive years, signaling confidence in its financial health, and analysts have revised their earnings upwards for the upcoming period, indicating potential growth ahead. For those interested in deeper analysis, there are 11 additional InvestingPro Tips available, providing a comprehensive understanding of Victory Capital's market position and performance trends.
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