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Rating:UPDATE 5 | The Rydex Sale: Anatomy of a Story Not Rated 4.1 Email Routing List Email & Route  Print Print
Thursday, June 28, 2007

UPDATE 5 | The Rydex Sale: Anatomy of a Story

Reported by Sean Hanna, Editor in Chief

The Rydex deal is done! But how has the deal developed since last fall?

Our reporters first heard from credible sources that Rydex was for sale by early October of 2006. It was not until this April that we felt sufficiently comfortable with our sourcing to publish a story with word on the sale process and the fund firms that could be interested in purchasing the Rockville, Maryland-based fund firm. That deal is now in its final stages, say sources, and word of the auction has now been picked up by a growing number of financial media outlets.

Rydex officials are declining to comment on the sales process or comment at all to MFWire. In May, a Rydex spokesperson confirmed in conversations that the mutual fund firm is indeed for sale.

Sources from inside Rydex have told MFWire reporters that the winning bidder has been selected by the Viragh family and their bankers at Goldman Sachs. The most mentioned winner's name is Security Benefit Life, which sources say has agreed to purchase a controlling stake in Rydex for roughly $200 million. However, the MFWire team has been unable to confirm those rumors and the deal's details. Also mentioned by sources is a Chicago-based private equity firm GTCR Golder Rauner LLC.

Below are the links to the key news stories in the history of this deal. We will be updating this page regularly as the story evolves.

Rydex Sale Timeline:

Sept/Oct 2006: Industry insiders tell MFWire reporters that a "pitch book" will make the rounds soon. Books typically are prepared by investment bankers overseeing a sale and are circulated to prospective buyers under a non-disclosure agreement (NDA). Sources point to Goldman Sachs as the i-bankers on the deal.

April 2, 2007: MFWire breaks the news that Rydex is for sale after confirming the auction with multiple sources familiar with the pitch book (see "Ryding to Auction, April 2, 2007").

April 9: A follow-up story on MFWire confirms the identity of Rydex's bankers -- Goldman Sachs -- after the hire was confirmed by sources inside the investment banking industry. The Goldman team is led by Chris Spofford and Don Truesdale. Neither banker has returned entreaties for comment. The story also identifies the Man Group, Security Benefit and IXIS Asset Management Distributors as the top bidders interested in Rydex. Separately, an investment banker told MFWire that a number of private equity firms had shown interest in Rydex. Pricing on the deal is reported as 10 to 12 times Rydex's $67 million of EBITDA. Sources tell MFWire on background that the Viragh family is seeking a higher price for the property rather than accepting a lower price for a strategic buyer (see Rydex' Sale: Will the Best Man Win?, April 9, 2007.

Carl Verboncoeur
April 17: Employees at Rydex tip the MFWire that CEO Carl Verboncoeur called an "all-employee meeting" at which top executives at the mutual fund firm confirmed the sales rumors to employees. Executive recruitors inform MFWire reporters of a "spike" in resumes coming from Rydex sales staff (see "Rydex Execs Hold a Pow-wow, April 17, 2007").

April/May: A spokesperson for Rydex confirms to the MFWire on multiple occasions that the company is for sale, though she claims other facts in the prior articles were inaccurate.

May 21: Security Benefit Life -- one of the finalists in the Rydex auction -- announces the purchase of Avera Global Partners, a 10-employee asset manager based in San Francisco.

June 8: MFWire reports that AIM Distributors CEO Gene Needles had been reassigned and that Invesco is out of the running in the Rydex auction. The report is based on information from multiple sources from late May to early June who claim that a bidder (Security Benefit) has already begun final due diligence -- the last part of the sale process -- and that the announcement inside Rydex is imminent (see "Invesco Ousts AIM Distributors' Chief, June 8, 2007). An hour later TheStreet.com's Mark DeCambre reports "Rydex Near a Sale." DeCambre names Invesco and E-Trade as potential buyers of Rydex and pegs the pricing at $800 million to $1 billion. Meanwhile, an industry source tells MFWire that the pricing has slipped to $200 million for a majority stake in Rydex and that the Viragh Trust will retain a portion of its stake. That source names Security Benefit as the buyer, though that remains unconfirmed.

June 11: Riding the coattails of TheStreet, InvestmentNews' reporter David Hoffman writes that about the deal in a pair of stories (See: "here and here). Hoffman's stories are based on unnamed sources and "press reports." (InvestmentNews is a Crain Communications publication unrelated to the MFWire and MFWire's publisher InvestmentWires).

June 13: Dow Jones reports that Rydex could be sold for as much as $1 billion and that E-Trade is a leading contender to close the deal. No source interviewed by MFWire has mentioned E-Trade during the nine months we have tracked down the story.

June 15: MFWire examines the attractiveness of the rumored $1 billion price tag for Invesco and E*Trade (read: "Does a Billion Dollar Bet On Rydex Make Sense?.")

June 18: InvestmentNews cites two unnamed executives at firms that looked at Rydex as saying that Rydex' bankers are emphasizing the mutual fund firm's ETFs capabilities. The two executive sources both work at firms that pulled out from the bidding in recent months, says the story.

June 28: Security Benefit does the deal! (See: "Rydex Says Yes to Security Benefit.")

Also on June 28, the law firm who advised Security Benefit on the deal unveiled itself with a release. (See: "Identity of Security Benefit Lawyers Revealed.)" 

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