8-K/A: Victory Capital Completes Amundi US Acquisition, Unveils Pro Forma Financials Showing Initial EPS Dilution

Victory Capital Holdings, Inc. has completed its acquisition of Amundi's U.S. business, issuing new common and preferred stock, with pro forma financial statements indicating an initial dilutive impact on earnings per share.

Summary

• Victory Capital Holdings, Inc. (Victory) completed the acquisition of Amundi's U.S. business (Amundi US) on April 1, 2025, as per the Contribution Agreement signed on July 8, 2024.
• In exchange for Amundi US, Victory issued 3,293,471 newly issued shares of Common Stock, representing 4.9% of the post-issuance common stock, and 19,742,300 newly issued shares of Preferred Stock.
• The total shares issued to Amundi represent 26.1% of Victory's fully diluted shares after the issuance.
• The Preferred Stock issuance included 14,305,982 shares on April 1, 2025, and a true-up payment of 5,436,318 shares on May 23, 2025, based on client consents.
• The total purchase price consideration for the acquisition was approximately $1,328 million.
• The filing includes audited financial statements for Amundi US for the years ended December 31, 2024, and 2023, and unaudited statements for the three months ended March 31, 2025, and 2024.
• Amundi US reported net income of $113,689 thousand for 2024, up from $76,241 thousand in 2023, with total revenues increasing to $543,723 thousand in 2024 from $467,257 thousand in 2023.
• For the three months ended March 31, 2025, Amundi US's net income significantly decreased to $3,260 thousand from $21,942 thousand in the same period of 2024, primarily due to a substantial increase in compensation and share-based compensation expenses.
• Unaudited pro forma condensed combined financial statements show a dilutive effect on Victory's earnings per share, with pro forma basic EPS of $0.62 for Q1 2025 compared to Victory's historical $0.97, and $3.80 for the year ended December 31, 2024, compared to Victory's historical $4.47.
• The pro forma adjustments include significant increases in goodwill ($251,926 thousand for Amundi US) and other intangible assets ($562,006 thousand increase over Amundi's book value), leading to higher depreciation and amortization expenses.
• Amundi will become a strategic shareholder of Victory Capital with two representatives joining Victory's Board of Directors.
• Reciprocal 15-year distribution agreements between Amundi and Victory Capital became effective upon closing, with Victory supplying US-manufactured products for Amundi's non-US distribution and distributing Amundi's non-US products in the US.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the immediate dilutive impact on EPS shown in the pro forma financials and the significant drop in Amundi US's Q1 2025 net income. While the acquisition is strategically positive, the initial financial implications present challenges.

Positives

• The completion of the acquisition expands Victory Capital's U.S. business and distribution network.
• Amundi US demonstrated strong revenue growth in 2024, with total revenues increasing to $543,723 thousand from $467,257 thousand in 2023.
• Amundi US's net income increased significantly in 2024 to $113,689 thousand from $76,241 thousand in 2023.
• The establishment of reciprocal 15-year distribution agreements provides long-term strategic benefits for both Victory Capital and Amundi.
• Amundi becoming a strategic shareholder and having representatives on Victory Capital's Board of Directors indicates a strong partnership and alignment of interests.

Negatives

• Amundi US experienced a significant decrease in net income for the three months ended March 31, 2025, falling to $3,260 thousand from $21,942 thousand in the prior year period.
• Total operating expenses for Amundi US increased substantially in Q1 2025 to $134,327 thousand from $97,056 thousand in Q1 2024, driven by higher compensation and share-based compensation.
• Amundi US paid a large cash dividend of $82,662 thousand to its parent company (AHUS) in Q1 2025, contributing to a significant decrease in cash and cash equivalents.
• The pro forma financial statements indicate a dilutive impact on Victory Capital's earnings per share, with basic EPS decreasing from $0.97 to $0.62 for Q1 2025 and from $4.47 to $3.80 for the year ended December 31, 2024.
• Acquisition-related costs and increased depreciation and amortization from newly acquired intangible assets contribute to higher pro forma operating expenses.

Risks

• Concentration of credit risk: Amundi US's revenues are highly dependent on the Pioneer Family of Mutual Funds, with the Pioneer Fund and Pioneer Fundamental Growth Fund representing significant portions of investment management and distribution fees.
• Fluctuations in financial markets and the composition of assets under management can significantly affect revenue and results of operations.
• The company is subject to U.S. lawsuits seeking damages, including trebled damages, which could be significant if assessed.
• The final purchase price allocation and fair value of acquired assets and liabilities are preliminary and subject to change, which could materially impact financial statements.
• The pro forma financial information does not account for potential cost savings, operating synergies, or revenue enhancements, nor the costs to achieve them, which could impact future results.

Future Outlook

The completion of the acquisition establishes Amundi as a strategic shareholder in Victory Capital, with two representatives joining Victory's Board of Directors. Reciprocal 15-year distribution agreements are now effective, positioning Victory Capital as the supplier of US-manufactured active asset management products for Amundi's distribution outside the US, and as the distributor of Amundi's non-US manufactured products in the US. The closing consideration is subject to customary post-closing adjustments and true-up payments for client consents, which will be determined in the future.

Industry Context

This acquisition represents a significant consolidation within the asset management industry, allowing Victory Capital to expand its U.S. business and leverage Amundi's global distribution capabilities. The reciprocal distribution agreements reflect a growing trend of strategic partnerships aimed at enhancing product reach and market penetration in a competitive global asset management landscape.

Management Changes

Corporate Governance

Legal Proceedings

• The Company, AHUS, and Amundi may from time to time be subject to claims pursuant to U.S. lawsuits, which seek damages, including trebled damages, in amounts which could, if assessed, be significant.
• New Mexico litigation related to Vanderbilt Financial, LLC (VF) closed in 2022, with Amundi US receiving $5,462 thousand in insurance proceeds in 2023.

Related Party Transactions

• Amundi US earned $261,471 thousand (2024) and $221,125 thousand (2023) in investment management and performance fees (net of fees waived) from the Pioneer Funds.
• Underwriting commissions, distribution fees, and service fees earned from the sale of Pioneer Funds shares were $72,350 thousand (2024) and $63,628 thousand (2023).
• Reimbursement for expenses incurred on behalf of the Pioneer Family of Mutual Funds and other Amundi affiliates amounted to $40,060 thousand (2024) and $40,386 thousand (2023).
• Advisory and sub-advisory management fees earned from other Amundi affiliates were $89,079 thousand (2024) and $73,785 thousand (2023).
• Amundi US was due $12,420 thousand (Dec 31, 2024) and $14,885 thousand (Mar 31, 2025) from the Pioneer Funds.
• Amundi US was due $24,478 thousand (Dec 31, 2024) and $34,638 thousand (Mar 31, 2025) from Amundi affiliates.
• Related party expenses, including sub-advisory management fees and recharges for operating expenses, were $29,640 thousand (2024) and $6,655 thousand (Q1 2025).
• Amundi US owed $6,085 thousand (Dec 31, 2024) and $2,884 thousand (Mar 31, 2025) to Amundi affiliates.

Stakeholder Impact

• Shareholders of Victory Capital will experience initial dilution in earnings per share due to the issuance of new common and preferred stock, but may benefit from long-term strategic growth and expanded market reach.
• Employees of Amundi US had the vesting of their share-based compensation plans accelerated and converted to cash-settled awards due to the acquisition, providing immediate liquidity.
• Clients of Amundi US were subject to consent processes, which, upon approval, contributed to true-up payments in the acquisition consideration, indicating continuity of client relationships.
• Amundi becomes a significant strategic shareholder in Victory Capital, aligning interests and potentially influencing future strategic direction through board representation.
• Victory Capital expands its U.S. asset management business and gains new distribution channels through the integration of Amundi US and the reciprocal distribution agreements.

Next Steps

• Finalization of the post-closing adjustment for the acquisition consideration.
• Integration of Amundi US's operations into Victory Capital.
• Execution and leveraging of the reciprocal 15-year distribution agreements between Victory Capital and Amundi.
• Cash settlement of the 2022 Long-term Incentive Plan in May 2025.
• Cash settlement of the 2023 Long-term Incentive Plan in January 2026.

Key Dates

Recommendation

Keywords

Victory Capital Holdings, Amundi US, Acquisition, SEC Filing, 8-K/A, Financial Services, Asset Management, Investment Management, Pro Forma Financials, Earnings Per Share, Corporate Governance, Strategic Partnership, VCTR, Pioneer Funds, Capital Raise