SAN FRANCISCO - Marx L. Cazenave, chairman and founder of Progress Investment Management Co., San Francisco, is rumored to be working on a deal to buy back the company from its new parent, FleetBoston Financial, Boston.
Fleet bought Progress' parent company, Liberty Financial Cos., Boston, for $1 billion in a deal that closed Nov. 1.
Progress itself was acquired in August 1998 by Liberty for $147.5 million. At that time, 80% of Progress was owned by co-founders Edwin Callan and Mr. Cazenave, and 20% was owned by employees. Mr. Callan also was the founder of consultant Callan Associates Inc., San Francisco.
Neither Mr. Cazenave nor Thurman White Jr., Progress' president, returned calls regarding the management buyout of Progress. The firm has about $4 billion under management, mainly for institutional clients in manager-of-managers programs that focus on emerging and minority-owned managers.
Keith Banks, chief executive officer of Fleet Asset Management, the asset management subsidiary that Progress just joined with other Liberty subsidiaries (Pensions & Investments, Oct. 29), also did not return calls. Charles Salmans, FleetBoston spokesman, said the company "does not comment as a matter of policy on rumors of acquisition or divestiture."
But multiple sources with knowledge of Progress' situation confirmed executives there are, at a minimum, discussing their options with Fleet management. Many expect Mr. Cazenave and his staff to buy back their firm, and those sources applaud that decision.
Call to Florida
Thomas Herndon, executive director of the $106 billion Florida State Board of Administration, Tallahassee, said Progress executives called to let him know they were concerned about their role within a larger asset management subsidiary and that they were exploring their options, including a buyback. Mr. Herndon said on Nov. 7 that he hadn't heard any news from Progress officials for several days. Florida's pension fund uses Progress for active domestic equity and active international equity strategies.
Consultants, who declined to be named, said they were glad to see Progress considering a buyback. Some are concerned about Mr. Banks' plans to centralize the research, distribution and operations functions of Fleet Asset's nine investment units. Progress, for example, conducts research about money management firms, not stocks or bonds, and so would not benefit from centralized investment research functions.
Consultants have not reported hearing that principals of other former Liberty subs are considering buyouts of their own. Ted Disabato, president of Disabato Associates Inc., Chicago, said he recently met with officials from Stein, Roe & Farnham, Chicago, to learn how the company would fare under FleetBoston. Other consultants are watching how Columbia Management Co., Portland, Ore., one of FleetBoston's larger investment subsidiaries, will fit.
Progress Investment Management provides due diligence and manager search, selection and monitoring services.
Some of its largest clients include the State Universities Retirement System of Illinois, Champaign; the Virginia Retirement System, Richmond; New York City Retirement Systems; New York State Common Retirement Fund, Albany; New York State Teachers' Retirement System, Albany; Maryland State Retirement & Pension System, Baltimore; and the Teachers' Retirement System of Illinois, Springfield.
Progress also has a special relationship with the $144 billion California Public Employees' Retirement System, Sacramento. Through Progress-Putnam Lovell Advisors, a joint venture with Putnam Lovell Securities Inc., San Francisco, Progress manages CalPERS' manager development program, making direct investments in money management companies with less than $1 billion under management. Brad Pacheco, CalPERS spokesman, did not return calls seeking comment on Progress' potential management buyout.
What Mr. Cazenave and his colleagues will pay for ownership of Progress is anyone's guess.
"So much depends on the bargaining power of the principals and what kind of discount they can command," said John Temple, managing director at the money management specialty investment banking boutique, Cambridge International Partners Inc., New York.
Whatever the price, it certainly will be below the going market price for investment firms, because it isn't a sale on the open market, said Mr. Temple. In fact, some consultants believe Fleet will provide financing and retain a minority interest.