Morningstar Inc. will acquire Ibbotson Associates for $83 million in cash, according to Morningstar spokeswoman Margaret Cohen.
The two companies complement each other, Morningstar officials said in a news release, particularly in consulting and asset management sides: Morningstar specializes in security selection and investment research, and Ibbotson is known for asset allocation and portfolio construction.
The deal will make the combined firm one of the world's largest providers of investment advice to defined contribution plans. Morningstar provides defined contribution plan advice through service providers such as Wachovia and New York Life. Ibbotson provided advice through providers including TIAA-CREF and Fidelity Investments, said Michael Henkel, Ibbotson's president. Both firms also have investment management funds of funds.
Ibbotson's capital markets, asset allocation, optimization and investment management research and software tools will be available to Morningstar clients on its global platform.
Roger Ibbotson, Ibbotson's founder and chairman, and Mr. Henkel agreed to join Morningstar; their titles and functions will be determined by an integration team led by Tao Huang, Morningstar's COO, said Ms. Cohen. The Ibbotson brand name will be retained, although details will also be determined by the integration team, she said.
The staffs of the two Chicago-based firms will be combined: Morningstar has 1,120 employees worldwide, and Ibbotson has 150. With regard to possible layoffs, a Morningstar statement said: "We will look at all areas of the combined company to determine the best organization structure. As with any acquisition, there will be some overlapping functions. We'll determine our staffing needs as we develop our integration plans."
In addition to the cash purchase price, Morningstar expects to realize about $10 million in cash tax benefits because Ibbotson's stock options will be canceled. The deal is expected to close in the first quarter. In the Morningstar statement, officials from both companies indicated that merger talks have been ongoing since summer.
