Putnam Investments sold in deal worth up to $1.3 billion

It is unclear what the new corporate parent will mean for the fund manager’s extensive Boston operations

The old Putnam Investments headquarters at One Post Office Square, in 2011.Pat Greenhouse/Globe Staff

Boston-based Putnam Investments will soon report to a new corporate parent, now that rival Franklin Resources has reached a deal worth up to $1.3 billion to acquire the fund manager from a subsidiary of Power Corporation of Canada.

The sale, announced Wednesday, is part of a broader arrangement between Franklin Resources, a California-based fund manager that’s more commonly known as Franklin Templeton, and Power’s Great-West Lifeco subsidiary, to broaden Franklin’s reach.

It wasn’t immediately clear what the deal will mean for Putnam’s extensive Boston operations. The company moved into a newly renovated headquarters at 100 Federal St. more than four years ago, after signing a 15-year lease with tower owner Boston Properties for 250,000 square feet, spread over 11 floors, to accommodate as many as 1,000 people.

In an investor presentation, Franklin said it was “committed to a significant presence in Boston” but it did not specify what that commitment entails. Franklin said the deal with Putnam will increase its operating income by $150 million by the end of the first year after the deal closes, a figure that includes savings from “expected cost synergies.”

Putnam currently employs nearly 1,200 people, including about 1,125 in Greater Boston — primarily at the downtown headquarters but also at an office in Andover. Putnam chief executive Bob Reynolds said that Franklin will keep the office at 100 Federal and that the Putnam name will stay on “key funds.”

“All the investment people will stay,” Reynolds said. “Certainly when you do a transaction like this, you look for [ways to save money], but that wasn’t a driver in this deal. We will remain in the same location. The Putnam brand will stay on the building.”

Reynolds said he will stick around with Power and Great-West, in part to help with the Putnam integration, but he will relinquish the chief executive role at Putnam sometime after the deal closes.

When the deal closes, likely at the end of this year, Franklin will pay $825 million upfront to Great-West in stock for Putnam — giving Great-West a 6 percent stake in Franklin — and then another $100 million in cash six months after the closing. In addition, Franklin will pay up to $375 million over the course of seven years, tied to revenue growth milestones for the two firms’ partnership. Putnam has been part of Great-West since 2007, when Great-West and Power acquired it for $3.9 billion from Marsh & McLennan Cos.

Great-West has also agreed to distribute Franklin products and will allocate $25 billion in assets under management to Franklin’s fund managers to oversee, with the expectation that amount will increase over time.

Putnam’s roots in Boston date back to its launch by George Putnam in 1937, in the early years of the mutual fund industry. The company currently manages $136 billion in assets, down from just under $200 billion at the time of its sale to Great-West, while Franklin has more than $1.4 trillion in assets under management today. Franklin said Putnam generates about $500 million annually in net fee revenue.

“It was a unique opportunity for both organizations,” Reynolds said. “There was a lot of mutual respect of ownership and cultures. Months ago, we started talking about what’s possible since the firms were so alike. I think Franklin was attracted to the product lineup and our performance. ... All of us at Putnam are very excited about what this means. The asset management game has become a game of scale. When you look at the capabilities of Franklin Templeton, they are complementary to the capabilities of Putnam. They [just] happen to be ten times our size.”