Investcorp is buying the debt management business of 3i Group for £222 million (US$270.6 million(, giving the Bahrain-based private equity firm one of the larger cross-border CLO management operations.
The deal includes $12 billion under management in European and U.S. collateralized loan obligations, which will continue to be run by 3i Debt Management managing partner and chief executive Jeremy Ghose.
John Fraser will continue to run U.S. operations of the debt management business.
The purchase, expected to close early next year, will more than double Investcorp’s assets under management to $23 billion. The company has been looking to expand its business to $25 billion in AUM through private equity, real estate and alternative investment assets.
Ghose founded the business in 2010 while at Mizuho Investment Management, which was then acquired by 3i in February 2011. 3i expanded the business in 2012 with the acquisition of WCAS Fraser Sullivan Investment Management and five European CLO management contracts from Invesco.
3i Group is using the proceeds from the sale to expand its private equity and infrastructure divisions.
In a press release, 3i CEO Simon Borrows said the debt management division “has produced strong cash income for the group since our strategic review in 2012. However, the vision fits less well with the 3i of today as we focus on our growing Infrastructure business and a proprietary capital approach in private equity.”
“The combination brings with it some of the most talented credit investment professionals in the industry together with a large universe of private and institutional clients spanning Europe, Asia, the US and the Arabian Gulf,” said Mohammed Al Ardhi, executive chairman of Investcorp, in a statement issued by his firm.
3iDM has issued three CLOs in 2016, including two Europe deals totaling €864.5 million (Harvest CLO XV, arranged by RBC and Resource Capital, and Harvest CLO 2016-16, through Credit Suisse). That’s fourth-highest volume of any European CLO manager through the end of the third quarter.
The company also issued a single U.S. deal, the $497.6 million Jamestown CLO IX, through Citigroup in August.
While selling its CLO management business, 3i said it would retain its existing non-equity stakes in CLO deals totaling €56 million (US$68.3 million), but would be “opportunistic” regarding a sale, according to a statement to Asset Securitization Report.
The deal is the largest-ever asset purchase for Investcorp, which will not require any external debt financing to complete the purchase. The company has been making a spree of strategic asset-management investments, including buying the “hedge fund of funds” arm of U.S.-based SSARIS Advisors.
Investcorp is the former owner of SourceMedia (the parent organization of ASR), which it sold in 2014 to Observer Capital.