Waddell & Reed bought by Australian company as new $140M tower goes up in downtown KC
An Australian financial services firm will acquire Overland Park-based Waddell & Reed in a $1.7 billion deal, the companies announced Wednesday night.
That news comes as crews erect a new $140 million tower in downtown Kansas City slated to be the new headquarters of Waddell & Reed. A statement from the companies did not say how the sale would impact the project or the company’s local employees.
Macquarie Asset Management, an arm of Australia’s Macquarie Group, will acquire all of the outstanding shares of Waddell & Reed for $25 per share in cash. Upon completion of the sale, Macquarie plans to sell off Waddell & Reed’s wealth management platform to LPL Financial Holdings Inc., an independent broker-dealer in Boston for $300 million.
Waddell & Reed’s board of directors has approved the transaction and it’s expected to close in the middle of 2021, pending regulatory approvals.
In an email to advisers on Wednesday, Waddell & Reed president Shawn Mihal acknowledged that the latest developments represented “a shift from the corporate strategy and vision” that had been shared with employees over the last year, which he said laid the foundation for the company’s long-term strategic growth.
“We can’t thank you enough for your support and partnership along the journey,” Mihal said. “However, we believe that the partnership with Macquarie and LPL will benefit our public company stockholders, our clients and you, our affiliated advisors.”
Waddell & Reed was founded in 1937 by Chauncey Waddell and Cameron Reed and went public on the New York Stock Exchange in 1998. More than 1,000 employees work in Overland Park.
In recent years, the company has shed employees amid a wider industry shift.
The financial services sector has experienced huge changes as many investors have signed onto free or low-cost online trading platforms. Waddell & Reed’s own disclosures have pointed to “increasingly fee sensitive” clients who choose low-fee, passive products like Exchange Traded Funds, or ETFs, over more expensive and actively managed products like mutual funds.
Waddell & Reed in 2016 offered a voluntary separation program to employees but turned to layoffs to reach a 10 percent reduction in full-time employees. In July of last year, the company informed Kansas regulators of plans to cut 158 jobs.
Assets under management — a key metric for a firm like Waddell & Reed — dropped from $123.6 billion in 2014 to about $70 billion in 2019. By comparison, Macquarie Asset Management will have more than $465 billion in assets under management once the deal with Waddell & Reed closes.
Waddell & Reed’s stock traded at just more than $17 a share on Wednesday, down from $72 a share in 2014, its highest point in the last 20 years.
“Over the past few years, we have been focused on leveraging our strong heritage as the foundation for transforming our firm into a more diversified and growth-oriented financial services enterprise,” said Waddell & Reed chief executive Philip Sanders in a statement. “The long-term partnership between Macquarie and LPL as part of this transaction accelerates that transformation and ultimately will benefit our clients and independent financial advisers while delivering significant value to our stockholders.”
The impact that Wednesday’s news will have on the company’s presence in the Kansas City region was less clear.
The Overland Park company made a huge splash last year as it announced plans to relocate from the suburbs into a new modern tower that promised to reshape the Kansas City skyline.
The company proposed occupying an 18-story tower at 14th Street and Baltimore Avenue. It includes a 10-floor, 913-space parking garage and eight floors of office space. Construction is well underway on the project, which was supposed to be completed by 2022.
“Waddell & Reed Financial and Macquarie are mindful of the building project in downtown Kansas City and completely appreciate the potential impacts the transaction may have on the community,” the company said in a statement late Wednesday. “We will be working with all the appropriate parties and reviewing plans closely, carefully and collaboratively and will provide updates over the coming weeks and months.”
Waddell & Reed’s new offices were heavily incentivized with a combined $97 million in state and local tax dollars.
The company was among the last employers to benefit from the economic border war between Kansas and Missouri. That practice was heavily criticized for spending tax dollars to lure jobs across the state line without actually creating new jobs for the region.
The state of Missouri granted the company up to $62 million in tax incentives to move its operations and employees less than 10 miles from Overland Park to Kansas City.
Last December, a divided City Council approved $35 million in local incentives in the form of a six-year, 75% tax abatement followed by nine years at 37.5%, a sales tax exemption on construction materials and a redirection of earnings and utility taxes.
Two days before the council vote, a former executive wrote to council members, warning against entering into any kind of long-term commitment with the firm.
“Frankly, I am appalled that Waddell & Reed is attempting to secure tax incentives from Kansas City for the purposes of moving their headquarters from Overland Park,” wrote Rick Perry, a former senior vice president. “I would caution the KC Council and others to be very careful in entering into ANY long-term financial arrangement with Waddell & Reed. The company may have been something in the past that it is NOT now.”
Waddell & Reed had planned to lease the new 260,000-square-foot tower from its developer. An attorney representing Waddell & Reed previously said the firm would pay a rent of at least $40 per square foot — well above the norm for downtown or any part of the metro. That means the firm could pay more than $10 million in annual rent.
Kansas City-based Burns & McDonnell was contracted for exterior design and construction, and HOK will design the interior.
Aside from widespread criticism about the incentives, the tower’s design was opposed by downtown residents. Members of the Downtown Neighborhood Association said the building was adding 900 more parking spaces to an area that already has an oversupply of parking. And they complained that the building lacks street-level appeal with only a small lobby and limited retail space.
This story was originally published December 2, 2020 at 9:55 PM.
