Credit Suisse Sells a Portion of its Asset Management Biz
News summary by MFWire's editors
Credit Suisse is ending 2008 with a deal to sell a portion of its asset management business to Aberdeen Asset Management in exchange for a 24.9 percent stake in the UK-based company. As of December 30, that stake was valued at 250 million pounds ($358 million).
A limited number of Credit Suisse's U.S.-registered mutual funds managed overseas will be impacted by the deal, Credit Suisse spokeswoman Suzanne Fleming told The MFWire.
Back in 2006, Credit Suisse realigned its asset management business in the US to focus on enhanced index, quantitative strategies and structured products, as well as alternative investments (see The MFWire, August 6, 2006).
The deal with Aberdeen, expected to close in the second quarter, covers the majority of Credit Suisse's global investors business in Europe, Asia Pacific and the US.
Ron Shafir, CEO of Credit Suisse's asset management unit, said the sale will enable Credit Suisse to focus its efforts on alternative investments, asset allocation and its Swiss businesses.
For his part, Aberdeen CEO Martin Gilbert said the deal gives Aberdeen "greater access to the distribution network of Credit Suisse and its Private Banking division, one of the world’s largest wealth managers."
In September of last year, Aberdeen purchased the active asset management business of Columbus, Ohio-based Nationwide Financial (see The MFWire, September 18, 2007).
Credit Suisse press release
Zurich, December 31, 2008
Credit Suisse today announced it had signed an agreement to sell part of its Global Investors ("GI") traditional asset management business in return for up to 24.9% of the enlarged share capital of Aberdeen Asset Management. The stake is valued at approximately CHF 381 million (GBP 250 million) as of December 30, 2008. The sale comprises CHF 75 billion of assets under management and includes the majority of the GI business in Europe, the US, and Asia Pacific. As part of the transaction, Credit Suisse will have a seat on the Board of Aberdeen. The transaction is subject to customary closing conditions, including regulatory approvals in various jurisdictions and approval by Aberdeen shareholders, and is expected to close in the second quarter of 2009.
In Switzerland, Credit Suisse will maintain its market leading asset management franchise, while the management of a small number of Swiss-domiciled funds will transfer to Aberdeen. Credit Suisse will continue to operate its Global Investor business in Brazil and through its various joint ventures across the globe.
"We believe this transaction offers our clients a compelling opportunity, providing them with access to an enhanced suite of investment products provided by a premier manager that has historically had strong performance across many asset classes," said Rob Shafir, CEO of Credit Suisse's Asset Management Division.
He added: "This agreement enables us to focus our resources on our alternative investments, asset allocation, and Swiss businesses, where we have strong performance and critical mass, and which better align with our integrated banking model. It also enables us to maximize the value of our Global Investors business, as we announced we would do earlier this year, and benefit from our new partner's advantages of scale in a consolidating marketplace."
Aberdeen is one of the UK's leading providers of institutional asset management services, and a top-tier active global manager of equities, fixed income and property assets in aggregated, closed and open-ended pooled structures. Aberdeen's total assets under management were GBP 111 billion as of September 30, 2008.
In connection with the transaction, Credit Suisse expects a non-cash charge from the goodwill related to the operations being sold of approximately CHF 600 million. This goodwill charge has no impact on its tier 1 capital.
Credit Suisse's stake in Aberdeen is subject to a purchase price adjustment which could result in Credit Suisse owning a stake of less than 24.9%. The sold business will be left with a minimum of GBP 20 million of net cash, which will also cover regulatory and working capital needs. Credit Suisse will generally be subject to a three year lock-up with respect to the Aberdeen shares, and a three year standstill, preventing Credit Suisse from acquiring more than 24.98% of Aberdeen's share capital. Credit Suisse and Aberdeen have agreed to extend the existing Distribution Agreement to also include the business Aberdeen is acquiring under this transaction.
Aberdeen Press Release
Aberdeen Asset Management PLC (‘Aberdeen’ or ‘the Group’)announces that it has entered into a definitive agreement with Credit Suisse Group AG (‘Credit Suisse’) to acquire certain fund management assets and businesses (‘the Acquired Business’) (‘the Acquisition’), subject to shareholder and certain regulatory approvals.
The purchase consideration will be satisfied by the issue to Credit Suisse of a maximum of 240 million new ordinary shares in Aberdeen, equivalent to 24.97% of the enlarged Group’s issued ordinary share capital, valued at £250 million based on the Aberdeen closing share price of 104.25 pence on 30 December 2008. The actual number of new ordinary shares to be issued to Credit Suisse will depend on the level of run-rate revenues delivered at the closing of the Acquisition, which is anticipated will take place on, or around, 30 June 2009 (‘the Closing’).
The assets under management (‘AuM’) the subject of the Acquisition were CHF75 billion (£40 billion) as at 30 November 2008, with associated run-rate revenues of approximately CHF220 million (£118 million) per annum and were this level of runrate revenues to be delivered at Closing, the maximum purchase consideration of 240 million new ordinary shares would be payable.
The Acquired Business is a long-only traditional asset manager with a leading presence in Europe, Asia and Australasia. It offers a broad product range, diversified predominantly across fixed income, money market and equities, with a variety of investment styles that will be integrated into Aberdeen’s investment processes. Its products are sold primarily to third party clients, with a significant minority of assets sourced through Credit Suisse’s Private Banking division, one of the world’s largest wealth managers.
Aberdeen has agreed an extension of the existing distribution agreement with Credit Suisse, to be signed on Closing. This will give Aberdeen greater access to the banking network of Credit Suisse.
The key benefits of the Acquisition for Aberdeen are:
-the opportunity to achieve greater scale in certain markets where the Group already has a presence, such as the UK, Australia, Germany, Switzerland and Japan. The Acquisition will also strengthen Aberdeen’s offering in certain product areas
-greater access to the distribution network of both Credit Suisse and Credit Suisse's Private Banking division;
-the introduction of another significant, long-term, quality shareholder, whose aims are aligned with Aberdeen’s;
-the strengthening of Aberdeen’s balance sheet by the issue of new shares and a reduction in relative gearing as the Acquired Business is debt free;
-substantial cost efficiencies and enhanced financial performance through the application of Aberdeen’s efficient operating model to the Acquired Business; and
- significant earnings enhancement (before any amortisation of intangible assets) from Closing.
Commenting on the Acquisition, Martin Gilbert, Chief Executive of Aberdeen, said:
“The acquisition confirms Aberdeen’s position as a leading global asset manager and provides us with greater access to the distribution network of Credit Suisse and its Private Banking division, one of the world’s largest wealth managers.
“This transaction fits perfectly within our strategy, a key part of which has been to make earnings enhancing acquisitions which give the business critical mass in our core competencies, complementing our organic growth.
"Given our proven track record of integrating businesses, we are well placed to ensure a smooth transition of the Credit Suisse assets to Aberdeen. We look forward to welcoming our new colleagues and clients, and also to welcoming Credit Suisse as a significant shareholder in Aberdeen. We believe that this transaction will be for the long-term benefit of all our shareholders."
Rob Shafir, CEO of Credit Suisse's Asset Management Division, said:
"We believe this transaction offers our clients a compelling opportunity, providing them with access to an enhanced suite of investment products provided by a premier manager that historically has had strong performance across many asset classes. It also enables us to maximize the value of our Global Investors business, as we announced we would do earlier this year, and benefit from our new partner's advantages of scale in a consolidating marketplace."
Martin Hughes, Chief Executive of Toscafund, Aberdeen’s largest shareholder said:
"Toscafund has already confirmed its support for this transformational acquisition, which has been made possible by the excellent operating platform offered by Aberdeen. Toscafund believes that the transaction is of clear benefit to the clients and shareholders of Aberdeen Asset Management and Credit Suisse."