Wednesday's Headlines: Buyout firms morph into asset managers as deals dwindle
With fewer deals to grab, buyout specialists are shifting gears as asset managers that run hedge funds and strip malls. Blackstone is earning twice as much from owning property as from buyouts; Carlyle has morphed into a fund-of-funds business by taking over hedge funds; and KKR now owns a stake in a 5,500-mile U.S. pipeline and lends to distressed companies, according to a Bloomberg article.
The story goes on to say: "The firms have little choice if they want to grow. Takeover candidates are expensive after a two-year, 95% rally in stocks, and commitments from backers such as pension funds have waned amid the weakest fundraising environment since 2003."
While analysts say diversification is always good, these moves come with smaller profit margins - LBOs typically collect a 1.5% to 2% fee on assets under management and a 20% cut of any profit. These new businesses produce comparable management fees, but little or no incentive fees. Blackstone's credit division had a 39% margin in the first quarter, compared with 64% for private equity business.
The Toronto based insurer Intact Financial will buy the Canadian insurance unit of AXA Group of Paris for $2.68 billion. [NY Times]
Citigroup is close to an agreement to set up a joint-venture securities business in China. [Financial Times]
Expert network firm Primary Global Research shut its offices in the face of an investigation, yet claims to be open. [DealBook]
Schwab plans to offer 401(k) retirement plans stuffed solely with ETFs-and let investors trade them without charge. [WSJ]
CIMB and Malayan Banking won approval to begin merger talks to potentially create Southeast Asia's biggest bank. [WSJ]
BankUnited, the lender backed by Blackstone and Carlyle, is nearing an agreement to buy Herald National Bank. [BusinessWeek]
Abu Dhabi Ports hired HSBC and the National Bank of Abu Dhabi to advise on refinancing the debt that it took out to build the $7.2 billion Khalifa Industrial Zone. [Bloomberg]
UBS may relocate its U.S. investment bank from Stamford, Conn. to the World Trade Center by 2015. [Bloomberg]
Cornerstone Mortgage will settle a federal complaint that accused it of discriminating based on maternity leave. [NY Times]
The ranks of millionaires expanded by 12% in 2010, led by Singapore, as gains in financial markets lifted global wealth. [Investment News]