A Gamco [profile] affiliate is buying a Midwestern mutual fund shop from a private equity giant in New England.

Mario Gabelli GAMCO Investors, Inc Chairman and Chief Executive Officer

Nicholas Galluccio, CEO of Teton Advisors, confirms that his Rye, New York-based firm is buying the business of Chicago-based Keeley Asset Management Corp. (Kamco) [profile] from Boston-based TA Associates. The deal is expected to close in Q1 2017, and Keeley will rebrand as Keeley Teton Advisors and become a wholly owned subsidiary of Teton.

Roger Kafker, managing director at TA, did not immediately return a call for comment on the deal.

Kevin Keeley, president and CEO of Kamco and son of its late founder (John Keeley, Jr.), will stay on as executive chairman of Keeley Teton, and Robert Kurinsky, chief financial officer and general counsel of Kamco, will become chief operating officer of Keeley Teton.

The pricing and terms of the deal have not been disclosed yet. This is Teton's first acquisition since spinning out of Gamco in 2009. (Teton and Gamco have some common family ownership and Teton turns to Gamco for distribution support, yet Teton remains a separate and independent company.)

"We financed the deal with cash on hand and borrowings from two family offices, including the Keeley family," Galluccio tells MFWire.

Keeley Teton "will keep all key Keeley employees ... and retain the firm's office in Chicago," Galluccio says. The Keeley Teton team will remain in Kamco's Chitown offices, and the Keeley funds will remain a separate series from the Teton Westwood funds.

"We wanted to keep the organization intact so there would be no change to the people, process, or philosophy of investing," Galluccio adds. "We're going to maintain the Keeley brand ... The Keeley brand resonates with a lot of clients going back a long time."

"We have a terrific platform," Kevin Keeley tells MFWire. "Keeley Asset Management will continue to operate in Chicago, same staff, same team, doing everything we've always done for our clients. We're excited about that continuity."

Keeley sees "a lot of nice synergies" in joining with the Teton team.

"There's a complementary culture. There's a complementary investment view ... a global small-mid-micro cap view of the world," Keeley says. "Collaborative opportunities will be net-positive ... Our team over here at Keeley is actually very enthusiastic about our new partnership."

"What they do and what we do are complementary," but without product overlap, Galluccio says. "The stronger diversified financial profile allows for creation of new investment products ... Pooled historical company databases enhances domain expertise."

Galluccio adds that the deal "expands the talent pool" for Teton (the two firms will have more than 30 employees once the deal closes) and gives Kamco access to distribution by G.Distributors, Gamco's distribution arm (which already supports Teton).

"By combining Teton and Keeley, we have a $4-billion asset manager with a broader suite of product offerings," Galluccio says. "We'll command higher visibility to attract Wall Street coverage and access to company management."

Looking ahead, Galluccio plans "to expand the Chicago operation over time" in marketing, new product development, and research. Yet he's ruling out making more acquisitions for now.

As for how the Teton-Kamco deal came about, Galluccio and Keeley both note that the firms have a lot of history. John Keeley Jr. (who died in 2015) and Mario Gabelli knew each other as analysts in the 1970s.

"A friendship developed, a natural bridge for our cultures and our investment perspectives," Kevin Keeley says.

TA bought into Kamco as a minority investor in 2008. After John Keeley Jr. died last year, TA bought the voting shares of Kamco parent Joley Corp.

"When this tragedy occurred and we realized that TA was going to sell it, we were the most logical acquirer," Galluccio says.

Kevin Keeley describes the Teton deal as "a transition from private equity ownership to a permanent home with like-minded investment professionals."

"There's a lot of strategic synergies there," Keeley says.

Keeley also praises TA's Kafker as a "top-notch person" to work with over the last eight years.

"We really couldn't have asked for a better partner," Keeley says. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE