Fortress Investment Group LLC's acquisition of fixed-income manager Logan Circle Partners LP represents the cornerstone of what both Fortress and Logan Circle senior executives intend to be a thriving, long-only institutional investment platform.
In fact, sources said the considerable financial resources of Fortress, a private equity and hedge fund manager, might finally enable Jude T. Driscoll, Logan Circle's CEO, to achieve his goal of creating a large, well-diversified institutional money manager similar to Delaware Investments, where he was CEO from 2000 to 2006.
That could involve more acquisitions of companies or portfolio management teams to add investment capabilities — especially equity strategies — something investment bankers said Fortress executives are actively pursuing.
The firm is among the most active of potential buyers this year. “They are looking at absolutely every opportunity out there. One executive I talked to there was looking at eight active deals sitting on his desk,” said one investment banker who works with Fortress and asked not to be named.
Bankers said Logan Circle met Fortress' acquisition criteria: firms with strong management and solid performance that are a little down on their luck.
Mr. Driscoll launched Logan Circle Partners with much fanfare in 2007 (Pensions & Investments, Oct. 1, 2007), but the firm has not thrived. Assets under management dropped $2 billion because of net client withdrawals and performance by the end of 2009.
Rumors that New York-based Fortress would acquire Logan Circle had been swirling for the past two months. The deal finally was announced last week.
Fortress is paying $21 million in cash to Guggenheim Partners LLC, Chicago. According to Logan Circle's ADV, Guggenheim Partners owns between 25% and 49% of the firm, and Mr. Driscoll's stake is between 50% and 74%. Additional terms weren't disclosed.
Lilly H. Donohue, Fortress' managing director of investor relations, declined to comment.
Guggenheim could get an additional, unspecified payment at the end of 2011, depending on growth and performance of Logan Circle, according to a Fortress news release. The deal is expected to close in the second quarter.
After the closing, Logan Circle will operate independently under its own name from its Philadelphia headquarters, said a Fortress insider who asked for anonymity. The source said there are no plans for Logan Circle to manage part of Fortress' credit-related strategies. “We do intend to build a traditional asset manager,” the source said.