Rabobank may succeed at getting one buyer for all investment units

Rabobank

Rabobank, the latest European bank to seek a single buyer for its far-flung money management business, could prove more successful at finding a purchaser than recent competitors.

Earlier this year, executives at the Utrecht-based Dutch bank — which saw its AAA credit rating cut by Standard & Poor's Rating Services late last year as Europe's economic outlook deteriorated — hired investment bank Barclays PLC to sound out potential buyers for its Robeco Group NV asset management business.

Investment bankers say bids for Robeco are due by mid-September and a deal could be reached as early as October. Representatives for Rabobank and Robeco declined to comment.

According to those bankers, Rabobank is focused on buyers willing to bid for its entire asset management business, which had $234 billion in assets under management as of July 31. With pretax earnings of roughly $220 million for the year ended June 30, Robeco could fetch well over $2 billion, by some estimates.

Buyers on the outside

Insistence on an all-or-nothing sale has left buyers interested in parts of the business on the outside looking in. They note the lack of synergies among Robeco affiliates such as:

  • Robeco Institutional Asset Management BV's more than $120 billion in assets managed for clients in the Netherlands and greater Europe;
  • Harbor Capital Advisors Inc.'s $64 billion open-architecture U.S. mutual fund family;
  • Robeco Investment Management's $25 billion U.S. institutional business;
  • SAM Group Holding AG's sustainable investment arm, with $16 billion in licensed or managed assets; and
  • Transtrend BV's $8.8 billion managed futures business.

Grief for sellers

With major acquirers of recent years such as BlackRock (BLK) Inc. (BLK) saying they are no longer in the market for “transformational deals,” insistence on one-off sales of asset management businesses has led to grief for some European banks.

In June, Deutsche Bank management decided to hold on to the bank's asset management business, following a tortuous effort to find a buyer for four segments of that business with combined assets of $540 billion: Deutsche Insurance Asset Management; institutional arm DB Advisors; its real estate-heavy RREEF Alternatives unit; and its U.S. mutual fund firm, DWS Investments Americas.

In April 2011, Milan-based UniCredit announced it would retain — and grow — the $274 billion money management business it had put in play 11 months earlier. Investment bankers said the bank's U.S. business, Pioneer Investments, would have attracted buyers, but the parent company held out for a single buyer of its global asset management operations.

Healthy growth

With a number of Robeco's money management affiliates enjoying healthy growth in a difficult market environment, some bankers predict Rabobank could break that losing streak.

On Aug. 14, Robeco reported net inflows of $21.6 billion for the first half of 2012, helped by a fiduciary management mandate of $15 billion from Pensioenfonds Vervoer, the Groningen-based Dutch transport pension fund. Those first-half inflows were more than double Robeco's record full-year inflows of $9.9 billion in 2011.

The company's U.S. institutional arm, New York-based Robeco Investment Management Inc., contributed to those gains, with the parent company's 2011 annual report noting the unit garnered record inflows of $2.1 billion for the year. For the first six months of 2012, it saw another $2 billion of net inflows.

With that kind of momentum, and offerings in market segments such as fiduciary management, low-volatility equities and sustainable investing, investment bankers say a number of strategic buyers and private equity firms could end up bidding for Robeco.

Affiliated Managers Group, Boston, is expected to be a leading bidder among strategic buyers, sources said. AMG has typically acquired more focused money management firms, but Robeco's strong presence in Europe and its Harbor mutual fund family (with a structure similar to the AMG Managers fund platform subadvised by the firm's affiliates) could make it an attractive target, said one investment banker who declined to be named.

AMG spokeswoman Laura O'Brien declined to comment.

Bankers say Sydney-based Macquarie Group, which purchased Delaware Investments three years ago, is likewise expected to bid for Robeco. Paula Chirhart, a spokeswoman for Macquarie, declined to comment.

According to sources, expected private equity bidders include CVC Capital Partners and Permira Advisers LLP, both in London; TA Associates and Advent International, both in Boston; and Tokyo-based Orix Corp. Representatives for all five companies declined to comment.

This article originally appeared in the September 3, 2012 print issue as, "Rabobank may succeed at getting one buyer for all investment units".