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Tuesday, August 07, 2012

Fundsters Await TCW Deal Confirmation

News summary by MFWire's editors

Is TCW's board pulling the trigger on a sale to the private-equity folks at Carlyle Group? Pensions & Investments raises the possibility that the end to Societe General's venture into the U.S. mutual fund business is near with its latest coverage.

The report was based on unidentified sources and raised the possibility that the TCW board voted on a deal Monday. One source told MFWire that if the vote did happen an announcement was expected Monday afternoon.

So far, there are no public words marking a deal.

If a deal does go through, look for a change in the leadership at TCW and possibly layoffs down the road.

Carlyle is reportedly providing financing on a deal that values TCW at $700 million and would take Societe General's 65 percent stake in TCW along with a 16 percent stake held by Amundi. The remaining shares, about 19 percent, are held by employees.

TCW managed $127.3 billion in AUM at the end of June.

On Friday, representatives for TCW and Societe Generale declined to comment to the MFWire on the possibility of a board meeting for yesterday.

When a deal does go through, the source told MFWire that MetWest CEO David Lippman will take the TCW CEO job from Marc Stern, who will become chairman replacing founder Robert Day. P&I outlined a similar scenario in its report.

Lippman is currently TCW's head of fixed income. He joined TCW in 2009 when the Los Angeles-based money manager purchased Metropolitan West Asset Management LLC in order to replace Jeffrey Gundlach. Stern fired Gundlach after taking the CEO job in 2009.

A deal would leave former MetWest executives in the driver's seat at TCW. Carlyle will reportedly take four of the seven TCW board seats with Stern, Lippman and Laird Landmann holding the remaining seats. Landmann is a cofounder of MetWest.

The P&I report adds that the deal could also mean "a restructuring that could include head-count reductions and compensation cuts in exchange for equity distributions could be imminent."

The cuts would reportedly be a part of an effort to increase TCW's margins that are currently in the twenties, according to P&I. That compares to rivals that have margins in the mid-thirties: BlackRock's operating margins are 37.2 percent; Franklin Resources' is 36 percent and Invesco's is 35 percent.

As part of the cost-cutting effort, Carlyle is also likely to cut compensation of key investment professionals while increasing the amount of shares they have in the money manager. Equity PMs targeted for retention include Craig Blum, Diane Jaffee, R. Brendt Stallings and Husam Nazer, according to the report.

The deal will also put more influence into the hands of Tad Rivelle, TCW's CIO of high-grade fixed income.

Job cuts will most likely come from accounting, distribution and information technology, as well as some fixed income posts that overlap between TCW and MetWest veterans.  

Edited by: Sean Hanna, Editor in Chief


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