Sun Life acquires majority stake in Crescent Capital from Attanasio
From Canada Sun Life Financial Inc. said it had agreed to buy 51% of Crescent Capital Group for up to $ 338 million, strengthening its asset management business with one of the largest investors in alternative credit.
Crescent, which is based in Los Angeles and manages approximately $ 28 billion, is a major player in senior lending, junk bonds, buyout financing and direct lending to privately-backed companies. Co-founders Mark Attanasio and Jean-Marc Chapus will retain control of day-to-day operations for five years, when Sun Life could acquire the remaining 49%, according to a statement released today. The talks were the first reported by Bloomberg in August.
The deal is the latest in Sun Life’s multi-year efforts to expand its management of higher-yielding alternative assets. It comes as many businesses, struggling to stay alive during the coronavirus pandemic, turn to alternative lenders such as Crescent for money they cannot get from banks or financial markets.
For more than a year, Crescent has researched offers from companies specializing in the purchase of stakes in private equity and hedge fund partnerships, or GPs. He opted for a deal with Sun Life in part because the Toronto-based insurance company has committed up to $ 750 million in future funds and new initiatives, Chapus said in an interview.
“We found a lot of common ground,” he said. “Being part of a large financial institution capable of providing capital, combined with a global presence, was good for us.”
‘Major piece of the puzzle’
Sun Life started an asset management business for insurers, pension fund managers, endowments and foundations as a separate business it now calls SLC management. The strategy includes at least five acquisitions since 2015, adding capabilities in credit, real estate and infrastructure. SLC managed $ 127 billion in public and private fixed income assets as of June 30, excluding real estate debt, according to its website.
“We see this as the last major piece of the puzzle,” said Stephen Peacher, CEO of SLC.
Shares of Sun Life were up 1% to C $ 55.24 at 11:02 am in Toronto, while the S & P / TSX Composite Index was down 0.1%. The stock was down 7.7% this year through Wednesday, compared to a 4.9% drop for the TSX.
The agreement gives Sun Life a majority share of Crescent’s management fee income and investment income from future funds. It does not include any profits, or interest earned, from existing funds. These remain with Crescent partners.
Sun Life is paying $ 276 million in advance. The remaining $ 62 million depends on future performance.
Attanasio, 63, and Chapus, 61, were former bankers of Drexel Burnham Lambert Inc. when they founded Crescent in 1991. After selling the business to the Trust Company of the West in 1995, they continued to operate its debt financing business. Crescent separated from TCW in 2011 and reverted to being an employee-owned company.
Meanwhile, Attanasio led a group that bought the Milwaukee Brewers baseball team in 2004.
Non-bank loans to middle market enterprises exploded in the years following the financial crisis. It is now garnering interest – as well as scrutiny – as a source of capital for companies that have not benefited from the Federal Reserve’s efforts to support the credit market.
Although the industry is still fragmented, a number of big players have emerged including Crescent, Ares Management Corp., Oak Hill Advisers, HPS Investment Partners and Owl Rock Capital Partners. Apollo Global Management Inc. and Blackstone Group Inc. also operate large private lending companies.
– With the help of Kevin Orland
(Updates with the share price in the eighth paragraph)