Nov. 30 (Bloomberg) -- Societe Generale SA, France’s second-biggest bank, is weighing whether to put its U.S. asset manager TCW Group up for sale, said people with knowledge of the situation.
One option may be a management-led buyout of the business, said two of the people, who spoke on the condition of anonymity because the matter is private. Societe Generale may decide not to sell TCW and could still pursue an initial public offering for the unit, the people said. Los Angeles-based TCW, which had $114 billion in assets under management as of Sept. 30, may be valued at about $1 billion, one person said.
A sale of TCW would add to billions of euros in asset disposals by Societe Generale since July as European banks cut the size of their balance sheets to cope with the region’s debt crisis. Chief Executive Officer Frederic Oudea said in September that the Paris-based bank is seeking disposals mostly from its asset-management and financial-services division to free up 4 billion euros ($5.3 billion) in capital by 2013.
“Most European banks are looking to offload non-core businesses at the moment and owning a U.S. bond fund manager is a bit of a luxury in this environment,” said Keith Baird, a London-based asset management analyst at Oriel Securities Ltd. “Any buyers would most likely be a smaller, domestic player looking to bulk up their fixed income offerings.”
TCW, led by CEO Marc Stern, has about 600 employees and manages fixed-income, equity and alternative-investment strategies for institutional investors such as pension funds. It also offers mutual funds for retail investors. About 58 percent of TCW’s total assets were in fixed-income products as of Sept. 30, 18 percent were in U.S. stocks and about 15 percent were in alternative investments, with the remainder in investments outside the U.S.
A management-led buyout could involve a private equity firm specializing in financial services, such as J.C.Flowers & Co. LLC or Advent International Corp., according to Christophe Nijdam, an analyst at AlphaValue in Paris.
“What you could also see is a takeover from an asset manager with geographical fit, and the first on the list would be Amundi,” Nijdam said. Amundi is jointly owned by Credit Agricole SA and Societe Generale. A representative for Amundi was not immediately available for comment.
Not for Sale
Societe Generale said in an e-mailed statement that its plans for TCW haven’t changed and the firm is on course for an IPO in the next two to three years.
“TCW is not for sale and we continue to believe that TCW is on a trajectory for strong and sustained growth,” Societe Generale said in the statement.
Europe’s largest lenders face increasing pressure to boost capital. Deutsche Bank AG, Germany’s biggest bank, said this month it is considering all strategic options for its global asset-management division. The review excludes the DWS mutual-fund unit in Germany, Europe and Asia.
Societe Generale agreed to buy a 51 percent stake in TCW for $880 million in 2001, and to increase its stake over time. It said then that the transaction would value the company at 2.2 percent of the $80 billion of assets under management. A similar multiple today would value TCW at about $2.5 billion.
In September 2009, former TCW Chief Investment Officer Jeffrey Gundlach offered to buy 51 percent of the business for about $350 million and said he valued the asset manager at about $700 million, according to court documents filed in August.
Gundlach, who took more than half of TCW’s fixed-income professionals to his new firm after being fired in December 2009, won a $66.7 million unpaid wages claim against TCW in September. He was also found to have breached his fiduciary duty to TCW and misappropriated its trade secrets. A judge has yet to rule on what royalties TCW is owed on its trade secrets claim.
After ousting Gundlach in December 2009, TCW acquired Los Angeles-based Metropolitan West Asset Management to replace Gundlach’s team and bolster mutual-fund assets.
Clients at TCW, which had $110 billion in assets as of December 2009, pulled $25 billion from the firm’s funds in the aftermath of Gundlach’s departure even as the acquisition of MetWest added $30 billion to total assets. TCW said in May that its mutual-fund assets have tripled to $33 billion since its acquisition of MetWest, driven by investor deposits into funds such as the MetWest Total Return Bond Fund and the MetWest High Yield Bond Fund.
The $5.3 billion TCW Total Return Bond Fund, managed by a team overseen by Tad Rivelle, has advanced 3.9 percent this year, lagging behind 80 percent of similarly managed funds, Bloomberg data show. The $17 billion MetWest Total Return Fund has advanced 4.2 percent, trailing 60 percent this year, the data show. Over the past five years, the MetWest Total Return fund has advanced 7.7 percent, beating 97 percent of peers, according to Bloomberg. The TCW Total Return Fund has advanced 8.3 percent, beating 99 percent of peers, the data show.
TCW was started in 1971 by Robert Day, the grandson of Superior Oil Co. founder William Keck.
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