(Recasts top, adds TCW returns, management details)
By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
NEW YORK Aug 9 Societe General on
Thursday agreed to sell its stake in asset manager TCW Group Inc
to private equity firm Carlyle Group LP and TCW
management and employees, clearing up questions over TCW's
ownership and putting it on track to be a more formidable
competitor against some of the largest bond managers.
Financial details were not disclosed. People familiar with
the matter told Reuters last month a deal could value TCW at
about $700 million.
Carlyle will own 60 percent of TCW, and the collective
ownership of TCW employees and management will rise from 17
percent to 40 percent.
Paris-based SocGen had initially bought a 51 percent stake
in TCW for about $880 million, and later increased its holding.
Amundi, an asset management joint venture of SocGen and Credit
Agricole Sa, owned 20 percent. Amundi also agreed to
sell its stake.
In 2009, TCW fired well-regarded bond fund manager Jeffrey
Gundlach and on the same day said it would acquire Los
Angeles-based Metropolitan West Asset Management.
Gundlach went on to start DoubleLine, which currently has
$40 billion in assets.
Although institutional investors, including pension funds,
foundations and endowments, had initially embraced the decision
to buy Metropolitan West, months of reports that SocGen was
going to sell TCW had left clients on guard. At that time, TCW's
assets under management stood at $110 billion. Assets now stand
at $131 billion.
Investors are more likely to put new money with TCW now that
the "era of uncertainty" around the future of the firm is gone,
fund researchers said, citing months of reports that Societe
Generale was going to sell TCW.
TCW's competitors include Allianz's Pimco,
DoubleLine Capital and Legg Mason's Western Asset
"I think it will be somewhat easier for them to win
institutional business now that their ownership will be less
ambiguous," said Eric Jacobson, director of fixed-income fund
research at Morningstar. "Ownership uncertainty is the kind of
thing that often puts off institutional clients."
TCW has offered all of its portfolio managers equity stakes
in exchange for five-year contracts, a deal accepted by managers
overseeing 90 percent of the firm's actively managed assets.
"That creates a lot of more stability for investors," Jacobson
The sale of TCW is expected to close in the first quarter of
2013, the parties said.
David Lippman, the head of fixed income at TCW, will become
the firm's president and chief executive officer, and Chief
Executive Marc Sternwill become chairman.
Carlyle's private equity investment is to be made through
its $13.7 billion U.S. buyout fund and its $1.1 billion
financial services fund.
In the wake of Europe's sovereign-debt crisis, SocGen and
other banks have bolstered capital to prepare for the
introduction of tough new capital and liquidity rules known as
Basel III. SocGen, France's No. 2 listed bank, said on Thursday
that the sale of TCW, once closed, would lift its core Basel III
capital ratio by 13 basis points. The bank has previously said
it was aiming to boost the ratio to between 9 percent and 9.5
percent by the end of next year.
"Societe Generale's problems are the problems that exist in
Europe and European banking and really have had absolutely no
impact on our business," TCW's Lippman said. "At no point have
we ever relied on SocGen, the business of TCW has always been
quite independent from that of SocGen. We don't believe there's
a lot that needs fixing at TCW."
When TCW purchased Metropolitan West Asset Management, Tad
Rivelle, another widely regarded fixed-income manager and
long-time competitor of Gundlach's, was named TCW's chief
investment officer of fixed income. "He is the Bill Gross of
TCW," added Jacobson. Gross is the co-chief investment officer
of Pimco, the world's biggest bond fund.
Lippman brushed aside any issues of competing against Pimco.
"I think Bill Gross runs a complex that is, you know,
approximately $1.7 trillion in assets under management," he
said. "I'm sure he's not very concerned about his business (with
regards to competition from TCW), and frankly we focus more on
our own business."
Unlike Pimco, TCW has a "strong line" of equity funds as
well as fixed income, said Neil Bathon, managing director at
Fuse Research, a Boston-based fund marketing consultant.
More than half of TCW's 14 equity funds with five-year track
records have outperformed their peers, while six of the nine
equity funds with 10-year track records have done so, according
to Morningstar Inc.
Jacobson said the challenge for TCW going forward is merging
its disparate cultures.
Todd Petzel, chief investment officer for Offit Capital,
which manages over $5 billion for wealthy investors and has an
investment in one TCW bond fund, said he expects the firm's
portfolio managers to have the control over the investments and
strategies as they had when SocGen owned the money management
(Editing by Steve Orlofsky, Bernard Orr and Leslie Adler)