June 11, 2023

DealBook: Carlyle Strikes Deal for TCW

7:42 p.m. | Updated

The Carlyle Group said on Thursday that it would buy the TCW Group, a Los Angeles-based investment manager whose clients include some of the nation’s biggest pension and endowment funds, from Société Générale of France.

The buyout firm is buying TCW as a portfolio company, rather than adding it to its own operations. The terms were not disclosed.

Carlyle is partnering on the deal with TCW’s management team, which will increase its already substantial stake in the investment firm to 40 percent. The transaction is expected to close in the first quarter of 2013.

“TCW is a premier global asset manager that will become even stronger as a free-standing company with increased employee ownership,” Olivier Sarkozy, Carlyle’s head of financial services, said in a statement. “The firm has enviable institutional relationships, a world-class distribution network and a vibrant and fast-growing mutual fund complex.”

The transaction will conclude a lengthy sales process for TCW, which has some $130 billion in assets. Société Générale, which bought a controlling stake in TCW in 2001 for about $880 million, has been under pressure to raise additional capital and has been exploring the divestiture of noncore assets.

Several private equity firms had participated in an auction of TCW, people briefed on the matter said previously, with Carlyle taking the lead in recent weeks.

Until December, TCW had been locked in a lengthy legal battle with Jeffrey E. Gundlach, the former head of its fixed-income department. It had fired Mr. Gundlach, one of the nation’s most prominent bond investors, in December 2009.

TCW subsequently sued Mr. Gundlach for breach of fiduciary duty and theft of trade secrets, accusing him and several members of his team of stealing confidential client data and proprietary trading systems to set up a new firm, DoubleLine Capital. More than 40 TCW employees eventually followed Mr. Gundlach to DoubleLine. Mr. Gundlach countersued, arguing that he was owed millions of dollars in unpaid fees for his work at TCW.

In September, a jury in Los Angeles delivered a mixed decision in the civil trial, finding Mr. Gundlach had breached his fiduciary duty to his former employer, but also awarding him $66.7 million in damages in the countersuit while awarding TCW no damages. The two sides settled their fight in late December.

To help replace the team that formed DoubleLine, TCW purchased Metropolitan West Asset Management in 2009.

Carlyle was advised by Bank of America Merrill Lynch, Sandler O’Neill Partners and the law firm Simpson Thacher Bartlett. It is receiving financing from JPMorgan Chase, Bank of America and Morgan Stanley.

TCW was advised by Morgan Stanley and the law firm Debevoise Plimpton, and Société Générale was advised by JPMorgan and the law firm Skadden, Arps, Slate, Meagher Flom.

Article source: http://dealbook.nytimes.com/2012/08/09/carlyle-said-to-strike-deal-for-tcw/?partner=rss&emc=rss

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