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Rating:Carlyle Sells a Piece of TCW and Gives Up Control Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, December 1, 2017

Carlyle Sells a Piece of TCW and Gives Up Control

News summary by MFWire's editors

Another overseas giant is buying a big stake in TCW, though it won't be taking control, at least not yet.

This morning the Carlyle Group, Nippon Life Insurance Company, and the TCW Group all confirm that Nippon Life is buying a 24.75 percent stake in TCW from Carlyle. TCW management is also upping their combined stake in the company to 44.07 percent (up from 40 percent). The deal also involves Carlyle giving up its majority ownership of TCW, dropping its stake to 31.18 percent (owned by its long-duration private equity fund, Carlyle Global Partners) from 60 percent and becoming a smaller stakeholder than the combined TCW management team.

The price tag on the deal was not disclosed, yet Bloomberg, Nikkei Asian Review and Reuters all report that Nippon Life is paying 55 billion yen, equivalent to $489.5 million. The Wall Street Journal is less specific but seems to agree with the others, claiming the price tag is in the "hundreds of millions of dollars." That reported price tag implies a valuation of the whole company at upwards of $1.978 billion, and given that TCW has about $200 billion in AUM, that valuation translates into about 0.99 percent of AUM.

The deal is expected to close in less than a month, by the end of 2017, and Nippon Life will appoint two directors to TCW's board. Technically, TCW management, Carlyle, and Nippon Life will each hold stakes in TCW Holding, which in turn holds 100 percent of TCW Group. There is no word yet on whether or not Nippon Life might increase its TCW stake further down the line.

The deal should not be a surprise to any TCW watchers or other fundsters. In a supplemental presentation on the deal, Nippon Life reveals that its relationship with TCW goes back more than three years to July 2014. Since then, TCW has handled some of Nippon Life's general account assets and has supplied some products to Nissay Asset Management, Nippon Life's domestic Japanese asset manager. The deal revealed today is also in line with reports from two months ago that Nippon Life was in talks to buy between 20 and 30 percent of TCW from Carlyle for between 50 billion and 100 billion yen.

The Nippon Life deal also fits with the industry rumors that Carlyle has had TCW on the block for some time. One source familiar with the situation told MFWire this past summer that the pressure to sell was coming from Carlyle, while TCW management resisted and wanted to keep autonomy. With the Nippon Life deal, Carlyle gets to partially cash out, while TCW management (as a group) becomes the plurality owner of the company.

Private equity giant Carlyle, through two of its funds, bought 60 percent of TCW in early 2013 for an undisclosed sum, later reported to be about $700 million. That implied an overall valuation of $1.167 billion for TCW, which makes today's deal's implied valuation of $1.978 billion a 69 percent increase in a little under five years, a CAGR of 11.29 percent. Put another way, Carlyle is reportedly getting $489.5 million, which translates to 69.93 percent of the $700 million it reportedly paid in 2013, but only giving up 48.03 percent of its stake.

David Lippman, president and CEO of TCW, praises Nippon Life as "a long-term investor that believes strongly in TCW's client-focused approach" and calls Carlyle "an excellent partner," too.

"In Nippon Life, we have found a partner that, like Carlyle, will enable us to maintain strong employee ownership," Lippman states. "We look forward to a long and fruitful partnership with Nippon Life."

Yoshinobu Tsutsui, president of Nippon Life, puts the deal in the context of one of his company's "highest priorities": strengthening their asset management business. He adds that Nippon Life has also "built a strong relationship with Carlyle for a long time especially in the asset management business."

Managing directors John Redett, co-head of Carlyle's global financial services team, and Eliot Merrill, co-head of Carlyle's global partners team, shared words of praise about TCW and Nippon Life.

Los Angeles-based TCW, founded in 1971, now has about 600 employees worldwide.

Nippon has a 32-year history in the asset management and a track record of making overseas investments in the space, buying stakes in PanAgora Asset Management (in the U.S. in 1990), in Reliance Capital Asset Management (in India in 2012), and in Post Advisory Group (in the U.S. in 2013). Nissay in Japan dates back to 1985.

Watch for Nippon Life to tap into TCW in a variety of ways after the deal closes. The insurer's presentation on the deal lists beefing up Nippon Life's fixed income asset management capabilities and personnel exchanges as key parts of the rationale for the deal. 

Edited by: Neil Anderson, Managing Editor

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