The team at a $739-billion-AUM (as of February 28), publicly traded fund firm in Tennessee is preparing to buy a $14.3-billion-AUM (as of December 31), 35-year-old alts shop in Minnesota in a deal worth at least three quarters of a billion dollars.

Seth P. Bernstein AllianceBernstein President, CEO

Today, Seth Bernstein, president and CEO of AllianceBernstein [profile], and Matt Bass, had private alternatives at AB, confirms that the Nashville-based asset manager has agreed to acquire Minneapolis-based CarVal Investors L.P. for $750 million in stock up front, plus a possible multi-year earnout (also in stock). (AB's parent describes the earnout as "a significant portion" of the deal structure). The deal is expected to close in Q2 (i.e. next quarter) and will turn CarVal into a wholly owned AB subsidiary named AB CarVal Investors, still based in Minneapolis.

Citi advised AB on the deal, while Rothschild & Co. advised CarVal. On the legal side, Rosen & Katz supported AB, while Schulte Roth & Zabel LLP helped CarVal. That $750-million up front price tag translates into more than 5.2 percent of CarVal's AUM and about 16.2 percent of AB's current market cap of $4.634 billion.

CarVal would bring 190 employees across five offices to AB, and the deal is expected to boost AB's private markets business to nearly $50 billion in AUM. Lucas Detor, managing principal of CarVal, lauds AB as "an excellent business partner" thanks to its "leadership, track record, values and platform."

"This acquisition allows CarVal to grow while retaining our investment and day-to-day independence," Detor states.

Meanwhile, AB's parent, Equitable Holdings, plans to allocate $750 million into CarVal's strategies. (That comes from the $10 billion that Equitable has committed to deploying from its general account and into AB's private alternatives offerings.)

"The transaction strengthens our business model by further enhancing the profile of our leading asset manager and increases long-term growth, all while maintaining $1.5 billion of cashflows," states Mark Pearson, president and CEO of Equitable.

Bass, for his part, describes CarVal as bringing "extenstive market experience, ... [a] strong leadership team and collaborative, entrepreneurial culture." Bernstein frames the deal as part of AB's "continued commitment" to growing its alts business.

CarVal launched as part of the food giant Cargill back in 1987. The asset manager became an independent Cargill subsidiary in 2006, and in 2019 CarVal spun out of Cargill in a management buyout. 

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