Nasdaq to buy Richmond-based Dorsey, Wright & Associates for $225 million

Nasdaq OMX Group Inc. said Monday that it will buy Richmond-based Dorsey, Wright & Associates LLC, a data analytics and passive indexing firm, for $225 million.

Nasdaq said the deal will enhance it capacity for growth in the index business, offering substantial opportunities in index licensing. The company will offer Dorsey Wright's 17 exchange-traded funds (ETFs) and Nasdaq's 69 licensed smart-beta ETFs focused primarily on dividend and income strategies.

The company’s indexes will have nearly $45 billion in assets tied to smart-beta ETFs and more than $105 billion benchmarked to all Nasdaq indexes.

In contrast to conventional indexes weighted to market capitalization, smart-beta strategies are weighted to alternative measurements..

“Our index business has been a strong growth area for Nasdaq over the last decade, and the acquisition of Dorsey Wright & Associates will further cement our position as a major player and industry innovator,” Adena Friedman, the president of Nasdaq, said in a statement. “We are always looking for opportunities  to expand Nasdaq's index offering with quality products that deepen our relationships with the investing community.”

The deal is expected to close in the first quarter.

Dorsey, Wright  is an independent, privately owned registered investment advisory firm. It was founded in 1987 by Tom Dorsey and Watson Wright.

Dorsey Wright provides three main services for clients: investment research and analysis, professional money management for financial advisers and individuals, and subadvisory and licensing services to mutual funds and ETF providers.

“Smart Beta represents one of the fastest growing sectors within the ETF market,” Dorsey, the president of Dorsey Wright said in statement. “This deal will allow us to grow significantly, while continuing to create products  and strategies that meet the needs of our clients.”

The deal  will be financed through a mix of debt and cash on hand.

Nasdaq said it plans to develop Dorsey Wright’s  growth strategy by accelerating product development, raising awareness of the its indexes and increasing the base of potential market participants through its global  distribution network.

Nasdaq expects the acquisition will be accretive to the company's earnings at closing.