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Rating:American Beacon Puts its Black Book Back in Circulation Not Rated 3.0 Email Routing List Email & Route  Print Print
Friday, March 07, 2008

American Beacon Puts its Black Book Back in Circulation

Reported by Erin Kello

Last fall, Tom Horton, chief financial officer of AMR Corp. (commonly known as American Airlines) -- the owner of American Beacon Advisors -- openly discussed the option of spinning off the business during the airline's third quarter earnings conference call with Wall Street analysts. Now, it looks like Horton has heard the decision and the DC-focused asset manager is on the block again. The airline last shopped its fund arm in 2002 and 2003.

Multiple industry sources have told The MFWire that a pitch book is already making the rounds to potential bidders.

Sought for comment, American Beacon Advisors chairman Bill Quinn responded in an e-mail: "We never comment on speculative information."

Quinn relinquished the CEO post at American Beacon in January of 2008, when Douglas Herring took over.

In October, Horton explained the rationale for spinning off or selling its stake in American Beacon Advisors.

"For each of these businesses, there are arguments for some type of value-enhancing activity, but there are also strategic and practical challenges," Horton told analysts at the time.

The sale, however, is not a foregone conclusion. American Airlines shopped American Beacon back in 2002, only to pull it off the block in 2003 after the appointment of then new CEO, Gerald Arpy, who found the business line to be an essential part of a turnaround strategy at the airline.

For the 2002 sale effort, American Airlines hired Salomon Smith Barney. Salomon is now, of course, part of Citigroup's Global Wealth Management unit. Whether Citi won the banking mandate this time around could not be learned. Also in 2002, news reports pegged Yucaipa Companies, a Los Angeles-based private equity firm, as the top bidder. This time around another private equity firm might make the final list of potential purchasers.

American Beacon employs a sub-advised model for it's funds, utilizing the pension fund strategy of multiple sub-advisors for each fund. This means that if there is a change of control at the company some or all mandates may be up for grabs.

The current sub-advisors include:

  • Barrow, Hanley, Mewhinney & Strauss
  • BlackRock Advisors
  • Boston Company Asset Mgmt
  • Brandywine Global Investment Mgmt
  • Calamos Advisors
  • Causeway Capital Markets
  • Dreman Value Management
  • Franklin Advisers
  • Goldman Sachs Asset Mgmt
  • Hotchkis and Wiley Capital Mgt
  • Lazard Asset Management
  • Metropolitan West Capital Mgmt
  • Morgan Stanley Invst Mgmt
  • Nisa Investment Advisors
  • Opus Capital Management
  • Panagora Asset Management
  • Post Advisory Group
  • Pzena Investment Management
  • Renaissance Investment Management
  • SSgA Funds Management
  • Templeton Investment Counsel

    The American Beacon funds were established in 1987 with AMR Investment Services (which became known as American Beacon Advisors in 2005) as the investment adviser. Its initial business consisted of the pension and defined contribution plans sponsored by the airline. As with other plan sponsor captive fund managers, the airlines strategy was to turn a cost center -- the oversight of its retirement plans -- into a profit center by marketing its expertise to other plan sponsors and related entities. American Beacon claimed $31.8 billion in AUM at the end of last year. 

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