UniCredit’s reported plan to sell or float Pioneer, the asset management business it withdrew from the auction block four years ago, has been labelled “strange” by fund market specialists.
The news of the potential sale – which was first reported in the FT last week – came after the Italian bank reported record losses of €14bn for 2013 and announced a strategic overhaul that would include the sale of various non-core assets.
“Having made the decision not very long ago to retain the group, it seems strange if the decision has now been reversed,” says Diana Mackay, joint chief executive of MackayWilliams, the fund research group. “In Italy the asset management entities have become a very good source of profitability for the banks and Pioneer has been very active and successful in the past couple of years.”
“Selling Pioneer will be a desperate act of selling off a relatively good bit,” says Ray Soudah, founder of Millenium Associates, which provides strategic advice for the global financial services industry.
UniCredit went through the long process of inviting bids for Pioneer in 2010, but cancelled it after 11 months, having received bids from French groups Amundi and Natixis and British company Resolution, as well as discussions about a tie-up with Eurizon.
Roger Yates, the chief executive at the time, said bids received had not been attractive and that Pioneer had a five-year plan in place, with the full backing of the parent bank.
Not everyone is sure the cancelled sale was a missed opportunity for buyers.
Jon Little, who was head of BNY Mellon’s International Asset Management Business when Pioneer was first put up for sale, felt the price tag was excessive.
“When it was for sale originally, we looked at it and found the guide price was not based on what it was really worth, but what it was on their books for,” he says.
Mr Little left BNY Mellon to set up Northill Capital, a boutique investment house that invests in asset managers. He says bank-owned businesses are “the antithesis of what we like – stodgy, assembled by acquisition, not known as being good at anything in particular”.
A number of bank-owned asset managers have been sold or put up for sale recently, including Robeco Asset Management and Santander’s fund business. Both came with agreements to continue access to the bank’s distribution system.
Ms Mackay suggests deals such as these may have made UniCredit more optimistic about its chances of selling its business. Last week, Crédit Agricole outlined plans for its Amundi fund arm to become one of the first in Europe to have more than €1tn under management by acquiring smaller rivals over the next few years.
She says: “I can only speculate, but maybe the greater dynamism in the fund arena makes the group more saleable and maybe the successful deals on Robeco and Candriam [formerly Dexia Asset Management] make the bank feel that the opportunities are better now than two years ago.”
According to the FT report, UniCredit now values Pioneer at €2bn-€3bn. This is roughly 1.7 times assets under management, which Eleni Papoula, an analyst at Berenberg, the German private bank, says is “towards the high end of the range, in terms of other asset managers with similar or higher gross margins”.
Mr Little says he thinks it is “very unlikely they would get that”. Although there are private equity firms in the market keen to buy asset managers, he explained, they are very much looking for cheap deals.
“A lot of private equity firms would love to be doing more asset management deals,” he says. “They find it hard to do business with boutiques, because they can be a bit flakier, but the big businesses with lots of costs, lots of divisions, lots of certain revenues, that is what they can work with.
“But it’s got to be cheap.”
KKR, the US private equity firm, bought Avoca, the Irish specialist credit manager, last year, while Spanish bank Santander sold a 50 per cent stake in its asset management arm to private equity groups Warburg Pincus and General Atlantic.
Private equity buyers are not the only companies active in the market now. Elliott Management, the New York hedge fund, recently snapped up an 11 per cent stake in F&C, the UK asset manager currently subject to a takeover bid from Bank of Montreal.
Additional reporting by Madison Marriage
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