and Co are doing another deal, this time more than doubling their alternatives AUM.
Yesterday Johnson, chairman and CEO of Franklin Templeton
] parent Franklin Resources, confirmed
that the San Mateo, California-based asset manager has agreed to acquire New York City-based Benefit Street Partners
. Ten-year-old BSP has about $26 billion in AUM, specializes in alternative credit, and is backed by Providence Equity Partners
Franklin will pay $683 million in cash up front (including $130 million to retire BSP debt), which translates into 2.6 percent of BSP's AUM, and there will also be an earnout of unspecified size "over the next several years", according to the slides
from Franklin's fiscal Q4 2018 earnings call yesterday. BSP CEO and chief investment officer Tom Gahan
and president Rich Byrne
joined Johnson and Franklin chief financial officer Ken Lewis
on the call. (See Seeking Alpha's transcription.
) Buying BSP is expected to more than double Franklin's alternative AUM to more than $40 billion.
The deal is expected to close in Franklin's fiscal Q2 2019, which ends on March 31 of next year. Morgan Stanley
advised Franklin on the deal, while BofA Merrill Lynch
advised BSP. Willkie Farr & Gallagher
provided legal counsel to Franklin, while Skadden, Arps, Slate, Meagher & Flom
did so for BSP.
Johnson praises the BSP team as "seasoned and talented," and he lauds their "differentiated approach to investing within the alternative credit space." Jenny Johnson
, president and chief operating officer of Franklin, adds that alternative credit expansion "has been a strategic focus area for Franklin Templeton."
Gahan, BSP's founder, describes Franklin as "the perfect long-term partner" for his team.
"Franklin Templeton's pedigree, global reach and extensive investment capabilities will provide BSP with increased resources and investment opportunities," Gahan states.
On the earnings call, Gahan said that his team looks "forward to working with Franklin's global distribution platform to offer new products." Later, in response to a question from Evercore ISI
analyst Glenn Schorr
, Gahan noted that BSP doesn't offer any listed BDCs or mortgage REITs.
"To the extent we can tap into the massive retail distribution here at Franklin, those are big growth areas as well," Gahan said.
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