T. Rowe’s new acquisition will pay off

Article Excerpt

T. ROWE PRICE GROUP INC. $157 is a buy. The seller of mutual funds and wealth management services (Nasdaq symbol TROW; Aggressive Growth and Income Portfolios, Finance sector; Shares outstanding: 226.9 million; Market cap: $35.6 billion; Price-to-sales ratio: 4.9; Dividend yield: 2.8%; TSINetwork Rating: Average; www.troweprice.com) has now completed its purchase of Oak Hill Advisors L.P. Based in New York City, Oak Hill arranges financing for distressed businesses that are unable to secure loans from traditional banks and lenders. The company will make an upfront payment of $3.3 billion, consisting of 74% cash and 26% in T. Rowe Price shares. Depending on Oak Hill’s future performance, it may have to pay an additional $900 million by 2025. That would raise the total cost to $4.2 billion. Expanding by acquisition adds risk, but this deal diversifies the company’s operations and should increase its earnings per share by about 5% in 2022. T. Rowe Price is a buy. buy…