Old Mutual receives new approaches for US asset management stake
Insurer has initial talks with Chinese conglomerate and two buyout groups
Old Mutual has received new approaches for its $900m controlling stake in its US asset management business, from potential buyers including China’s HNA Group, TPG and Advent.
The UK-listed insurer held preliminary talks with the Chinese conglomerate as well as the two US private equity groups but has failed thus far to forge a path to a definitive agreement, according to four people briefed about the discussions.
Instead of engaging the potential bidders, the insurer sold down part of its 66 per cent stake in Old Mutual Asset Management (OMAM) to 51 per cent on the open market in December, a move that has frustrated the buyers and could jeopardise a future deal.
HNA, the highly acquisitive Chinese group, is still interested in exploring a deal with Old Mutual only as long as it can buy a majority stake in OMAM, two sources said.
Advent, the Boston and London-based private equity group, is still interested in a transaction, while TPG, the US private equity group, has since given up on a deal, people close to the companies said.
HNA, which generates $46bn in annual revenues, signalled its ambition to build an asset management arm last month by acquiring a stake in SkyBridge Capital, the $12bn fund of hedge funds business founded by Anthony Scaramucci, an early backer of US president Donald Trump.
According to those briefed about the talks, the management of OMAM has thrown up roadblocks to a deal.
The Boston-based management, led by chief executive Peter Bain, is pursuing what it calls an “acquisition growth strategy” and plans to add to the company’s portfolio of boutique investment management businesses. It has landed only one such acquisition in six years and executives have said that speculation over Old Mutual’s intentions was putting off potential targets.
In a regulatory filing on December 12, OMAM said that any block sale of Old Mutual’s assets could also negatively impact on its relationship with its existing affiliated boutiques and affect the company’s financing.
“Any potential disagreements between our management and a new majority owner over matters such as the economic arrangements or management policies with our affiliates, growth strategies and compensation philosophy of our affiliates could adversely affect our relationships,” said the filing. “Under certain circumstances, [it] could result in the acceleration of our outstanding indebtedness and/or the redemption of our outstanding notes.”
The firms that want to take control of OMAM fear that they are running out of time, following a string of share sales by the parent company since it floated a minority stake in New York in 2014. When Old Mutual sold down its stake to 51 per cent in December it promised not to sell any more shares for 60 days.
In spring 2016, Old Mutual held talks with Affiliated Managers Group over a sale of its whole stake, but they did not result in a deal. It is unclear whether AMG is still interested in the asset. Old Mutual, OMAM, HNA, TPG, Advent and AMG declined to comment.
London-listed Old Mutual is in the early stages of a four way break-up, under chief executive Bruce Hemphill. Aside from OMAM, the company owns a wealth management company in the UK, an insurance business in South Africa and a stake in Johannesburg-based Nedbank.
On OMAM’s most recent earnings call this month, Mr Bain said that the investment management boutiques that he hoped to acquire were asking for clarity on the company’s ownership before being prepared to “engage definitively”.
He said: “That’s fair and we’re very comfortable with it and the parent [Old Mutual] is very aware of that fact and they are managing accordingly.”
Stephen Belgrad, chief financial officer, added that Old Mutual’s share sale in December was “a nice step forward” in terms of answering some of those questions.
On Friday, OMAM shares closed at $14.85, up nearly 40 per cent from a year ago, giving it a market valuation of about $1.8bn.