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Friday, March 27, 2015

Get Your Russell Bids In Next Week!

News summary by MFWire's editors

It's time to get your bids in for Russell Investments [profile], the asset management business at least. The London Stock Exchange seems to be leaving no stone unturned when it comes to searching for possible buyers.

Luisa Beltran of PE Hub reports that, according to unnamed sources, the LSE has sent out more than 50 (and up to 70) books to potential bidders, some as far away as in China and Japan. One unnamed private equity executive told the trade publication that first round bids are due early next month; and April 1 is coming up in just five days. PE Hub points to Goldman Sachs and J.P. Morgan as LSE's bankers for the deal, and Reuters previously pointed to Barclays being involved, too.

That PE exec and an unnamed banker reportedly told PE Hub that the pricing in the deal has come down. They estimate that the Russell business will sell for between $800 million and $1 billion. That price translates into 6.4 to 8 times Russell's EBITDA of $125 million, or 0.291 to 0.364 percent of Russell's September 30 assets under management of $275.09 billion.

That's a noticeable drop from the $1.2 billion to $1.5 billion price tag reported as recently as a month ago.

The LSE bought all of Russell last summer, specifically to get its hands on Russell's index business. Even before the deal was official in June, fundsters were whispered about the Russell asset management sale that they assumed would follow LSE's victory, and the exchange officially kicked off the sale last month.

Who's going to bite? CIBC, which was outbid by the LSE last year for all of Russell, is one name being tossed around. Yet MFWire still wonders how the Canadian bank would balance owning Russell, a consultant and manager-of-managers, with the big minority stake the bank already owns in American Century, which manages its money in-house and has to deal with investment consultants.

PE Hub says that "private equity is expected to dominate the auction." Like CIBC, private equity firms CVC Capital Partners, Silver Lake, TPG Capital, and Warburg Pincus were all outbid by the LSE last year, and PE Hub's sources point to TPG and Warburg as both being possible bidders this time around. The publication also mentions several other possible PE bidders:

  • Aquiline Capital Partners, which backs the TAMP Asset Mark and alternatives manager Altegris;

  • Carlye Group, which filed to launch its own mutual funds a year ago and which backs fixed income asset manager TCW;

  • Friedman Fleischer & Lowe;

  • Genstar Capital, on whose strategic advisory board ex-Russell vice chairman Hal Strong sits and which backs Asset Mark and alternatives manager Altegris;

  • KKR, which had its own alternative mutual fund effort but closed two funds a year ago;

  • Stone Point Capital, which backs an acquisitive 401(k) recordkeeper, Verisight;

  • TA Associates, which once backed AIM (now part of Invesco) and AMG, currently backs First Eagle, bought a majority stake in Stadion Money Management in 2011, once looked into buying AIG Investments and what is now American Beacon, is buying a majority stake in CLS Investments and Gemini Fund Services/Northern Lights Distributors backer NorthStar Financial Group, and is still hungry for asset manager deals; and

  • Thoma Bravo, which failed in its bid to buy mutual fund shop Munder Capital in 2013 as possible bidders this time around.

    MFWire also still sees Russell's competitors, like Wilshire (which also has its own multi-manager mutual fund family) and Callan (which has multi-manager collective funds for retirement plans, the channel that inspired Russell's own mutual funds), as possible fits, too. 

    Edited by: Neil Anderson, Managing Editor

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