Another Japanese giant may soon buy into the U.S. mutual fund business, this time on the West Coast.
Nippon Life Insurance
is in talks to buy a 20 to 30 percent stake in Los Angeles-based TCW
from Carlye Group
, Nikkei Asian Review
, Pensions & Investments
, and Reuters
all report. And the Wall Street Journal reports
that the bidders also include Mitsubishi UFJ Financial Group
Earlier this year Japan Times reported
that Nippon Life president Yoshinobu Tsutsui
is specifically interested in acquiring U.S. asset managers and life insurers.
The TCW deal price tag could rang from 50 billion to 100 billion yen, according to Nikkei
, which translates to between $444 million and $888 million. For a 20 to 30 percent stake, that implies an overall valuation of TCW of between $1.48 billion ($444 million for a 30 percent stake) and $4.44 billion ($888 million for a 20 percent stake). TCW, which is known for fixed income investing, had $196.7 billion in AUM as of June 30, so the rumored price range values the company at between 0.75 and 2.26 percent of AUM.
Private equity giant Carlyle, through a pair of its funds, bought
about 60 percent of TCW four years ago, leaving about 40 percent in the hands of TCW management. The terms of that deal were not disclosed, though reports since then have pegged the price tag at about $700 million. Thus, the rumored Japanese deal now would entail Carlyle selling between one-third and one-half of its stake and would turn TCW's management into the company's biggest shareholder block. The WSJ
notes that, thanks to their big stake, management would have a say in any deal and that, despite longrunning IPO rumors
, management has "resisted a potential initial public offering." TCW is currently led by president and CEO David Lippman
and chairman Marc Stern
Sale rumors, partial or complete, should not be a surprise. Carlyle is a financial backer, and private equity firms typically don't hold their investments for too long if they have a choice, with seven years often being the theoretical maximum. Conventional wisdom is that private equity-backed companies are, to some extent, usually always for sale, passively if not actively.
Regarding TCW in particular, MFWire
heard rumors as recently as this summer that Carlyle has had TCW on the block for some time. A source familiar with the situation claimed that management wants TCW to remain independent and that they have "nixed the idea of being consolidated into another company," which lent more credence to the IPO option. Yet there's no real pressure to sell, that source said, except from Carlyle.
"[TCW management is] not hurting for money," that source told MFWire
. "What they care about is autonomy."
If a deal goes down, TCW would not be the only big U.S. fund firm with a sizable minority stake held by a Japanese giant. Last year Nomura bought
41 percent of American Century.
Neil Anderson, Managing Editor
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