TIAA-CREF agreed to buy Nuveen Investments from Madison Dearborn Partners for $6.25 billion, propelling the manager of teachers’ retirement savings into the top 20 of U.S. mutual-fund firms.

The price includes $4.56 billion in outstanding debt, according to the New York-based firm, which announced the acquisition in a statement Monday. TIAA-CREF will add $221 billion in assets, bringing its funds under management to about $800 billion.

Chicago-based Madison Dearborn purchased Nuveen almost seven years ago for $5.75 billion, at the time the largest buyout of a U.S. asset manager.

“This makes TIAA-CREF a real contender in the marketplace,” said Geoff Bobroff, a mutual fund consultant based in East Greenwich, R.I. “They will have an interesting mix of businesses.”

The transaction is the biggest for TIAA-CREF, led by former U.S. Federal Reserve vice chairman Roger Ferguson and founded in 1918 as a pension fund for professors. The acquisition will help TIAA-CREF expand mutual-fund assets and appeal to a broader set of individual investors. The combined company would rank among the 20 largest U.S. mutual-fund firms, a list dominated by firms such as Fidelity Investments and Vanguard Group, data from Morningstar show.

“We think this is very complementary,” Robert Leary, head of TIAA-CREF’s asset-management unit, said in an interview. “It also adds a very large distribution capability. They’re a powerhouse in the retail distribution world.”

Madison Dearborn acquired Nuveen in November 2007, near the top of the buyout boom and less than a year before the September 2008 collapse of Lehman Brothers Holdings. Nuveen is the largest U.S. manager of closed-end funds and is also known for its offerings investing in municipal debt — two areas that were hurt industrywide during the 2008 financial crisis. Nuveen manages about $54 billion in mutual-fund assets and about $41.5 billion in closed-end funds.

Nuveen’s adjusted earnings before interest, taxes, depreciation and amortization fell 6.2 percent to $492 million in the year ended 2013, according to a filing.

Ferguson, 62, was among those mentioned in a survey of economists last year as a potential successor to former Federal Reserve chairman Ben S. Bernanke. Ferguson has changed TIAA-CREF dramatically since taking over in April 2008, according to Burton Greenwald, a mutual fund consultant based in Philadelphia.

Under Ferguson, TIAA-CREF diversified beyond investors consisting mainly of employees at academic and medical institutions by adding institutional clients. TIAA-CREF had $72 billion in open-end mutual funds as of Feb. 28, more than tripling its assets since the end of 2009, according to Morningstar.

“The company has really done a good job building the asset-management operation beyond its traditional client base,” said Greenwald in a telephone interview.

The firm has had strong performance in mutual funds, Greenwald said, which it has used to transform itself into a bigger player in the retirement business. The deal will give TIAA-CREF access to distribution among brokers and advisers, an area where it has traditionally been weak.

TIAA-CREF was named the best overall large fund company this year and in 2013 by Denver-based research firm Lipper. Nuveen won the same award in 2012.

Nuveen will remain a distinct unit within TIAA-CREF, retaining its brand name and its own management, Ferguson said in an interview. He also said the deal wouldn’t change the nature of TIAA-Cref’s mission.

“We will continue to single-mindedly focus on the not-for-profit sector,” Ferguson said. “This isn’t a consolidation or a synergy play. We look at it as a very smart investment.”

— Bloomberg News