Investec Asset Management CEO Hendrik du Toit and about 40 senior managers and employees will buy a combined 15% stake in the firm for £180 million ($269 million).
Management and employees have an option to acquire another 5% over the next seven years, the company said in a statement Thursday.
“Investec and Investec Asset Management strongly believe that institutional clients are attracted to asset management companies that have significant operational independence and alignment of incentive structures to long-term performance,” the company said in the statement.
Investec Asset Management has £69 billion pounds in assets under management. The money management unit of Investec PLC has recorded net inflows and 12% growth since March 2012.
“This transaction implies a £1.2 billion valuation for Investec Asset Management, well below our 1.9 billion-pound fair value,” Greg Saffy, analyst for RMB Morgan Stanley, said in an e-mail. At the same time, it “solidifies” management's stake in the unit, “which we rate highly,” Mr. Saffy said.
Half the funding will be raised through equity and half through debt, the company said. The buyers will finance the equity investment with cash, deferred bonuses, long-term incentive awards and borrowing. Investec Asset Management will pay Investec a special dividend of about £60 million, the company said in the statement.
The sale of the money management stake will be beneficial, according to Patrice Rassou, head of equities at Sanlam Investment Management. “It's good to lock in the key staff; they are the key assets of the company.”