On Monday, news was swirling that Carlyle Group LP (NASDAQ:CG) was moving forward in its acquisition of the asset manager, TCW Group Inc. The private equity firm was set to hold a meeting with its board of directors to approve a possible cash and stock deal.
Fast forward three days later and it appears the deal is a wrap.
The Children's Investment Fund Management LLP is a London-based hedge fund firm better known by its acronym TCI. Founded by Sir Chris Hohn in 2003, the fund has a global mandate and supports the Children's Investment Fund Foundation (CIFF). Q3 2021 hedge fund letters, conferences and more The CIFF was established in 2002 by Hohn Read More
According to the Wall Street Journal, the news may be announced as soon as the end of the trading day for Paris. The French bank, Societe Generale SA (EPA:GLE), has a majority ownership in TCW, which has around $127 billion in assets under management.
What will each firm get from the transaction? Carlyle Group LP (NASDAQ:CG) is expected to take a majority stake from Societe Generale via a private-equity fund. It will acquire the company as a portfolio company, not a strategic purchase.
For TCW, its management will receive a minority interest, according to Bloomberg. This comes as TCW employees already have a chunk of ownership in the company; they will now have an opportunity to see this stake grow.
Sale Makes Sense for Société Générale
For Société Générale, the sale comes at a good time. It has been slashing costs and selling assets to bring in cash, as it works toward compliance for the new capital targets placed on European banks during the current financial crisis.
The French bank had previously set a goal last September to obtain EUR 4 billion through asset sales. During the last few years, it has been moving away from its asset-management interests, both domestically and internationally, including an exit from business in Korea and the U.K.
With the sale, it will end an 11-year relationship between the two entities. Société Générale took a controlling interest in the asset manager back in 2001 for approximately $880 million, but over time, increased its share to 85 percent. Recently, the bank wrote down its TCW position by EUR 200 million.
The news of divesting TCW was just a matter of time. Rewind to 2009 and the bank said it would spin off TCW in a stock offering, reported the Wall Street Journal. It appeared to be moving forward by hiring Citigroup Inc. (NYSE:C) to help review strategic options for TCW.
This contributed to the firm’s contentious break up with its bond trader, Jeffrey Gundlach; he oversaw around 60% of the firm’s assets.
It was an ugly split as TCW and Gundlach needed assistance from the courts for his exit. TCW alleged Gundlach took firm trade secrets with him, while Gundlach’s side of the story was the firm owed him millions of dollars in back wages.
Gundlach has since established his own fixed income firm, Doubleline Capital LP (DBLEX), and supposedly poached former TCW employees to join him.
With the news of the TCW acquisition, Carlyle is up 1.94 percent to $24.81.