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Monday, December 17, 2012

Carlyle’s TCW Takeover Faces Another Obstacle

News summary by MFWire's editors

A deal is a deal, except when some pesky arbitrage unit says it ain’t.

Reuters reports that the Carlyle Group's planned $780 million takeover of TCW Group [profile] could prove less lucrative than anticipated because of TCW's financial ties to buyout firm EIG Global Energy Partners LLC, according to a TCW document directed to its lenders.

At least a sixth of TCW's profit stems from payments made by former unit EIG, which spun out of TCW in 2011, according to data in the document which was seen by Reuters. TCW is a unit of French bank Societe Generale.

After months of speculation, the deal was announced in August. EIG immediately filed suit to quash the deal. A Federal judge blocked the deal in November, but the deal was back on earlier this month.

According to Reuters, EIG is separately seeking to block Carlyle's acquisition of TCW in court. EIG's fund that makes these payments has been put into a special trust by a judge pending an arbitration hearing. This hearing is expected on January 30, according to a person familiar with the situation.

The newswire also reports that while it was known that EIG contributed profit to TCW, a highly rated Los Angeles, California-based fixed income fund manager with $135 billion assets under management, the extent of these payments had not been previously made public.

This revelation and the outcome of EIG's arbitration could upset the math that Carlyle, which is one of the world's most powerful private equity firms, carried out in agreeing to buy TCW in August, according to Reuters.

More on this saga can be found in Reuters

Edited by: Tommy Fernandez


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