TCW-Carlyle deal could be stalled by judge over EIG claim
By Randy Diamond | November 7, 2012 1:57 pm
A federal judge in California is expected to decide later this week whether the buyout of TCW Group by its management and private equity manager Carlyle Group can continue.
Several sources said another private equity manager, EIG Global Energy Partners, which has been seeking an injunction to stop the merger, could get better terms from a profit-sharing agreement made originally in 2009 with TCW depending on the ruling by U.S. District Judge Christina Snyder in Los Angeles.
EIG officials, who spun off from TCW in 2011, argue that the buyout would hurt EIG because it competes with Carlyle for energy investment projects.
The dispute is scheduled to be handled in arbitration at an unspecified future date.
TCW owner, French bank Societe Generale, announced in July that it would sell the firm to Carlyle and key TCW employees. The deal is scheduled to close in the first quarter of next year.
But if EIG officials are successful in delaying the deal, they would have Societe Generale in a corner, and could force changes in the profit-sharing agreements, the sources say.
As part of the 2009 spinoff agreement, EIG pays TCW up to 20% of the profit it makes from various EIG energy funds containing combined more than $10 billion in assets under management, the sources say.
The funds have been very lucrative for TCW. The fees, where investors pay up to 20% of profits plus an additional 2% management fee, have come to be one of TCW's largest sources of revenue, the sources say.
Officials from TCW and EIG wouldn't comment specifically on the dispute.