Sun Life Financial is acquiring a 51% stake in credit manager Crescent Capital Group, to add to its money management business, Sun Life Capital Management (U.S.), said Stephen C. Peacher, president, Sun Life Capital Management (U.S.), and Jean-Marc Chapus, managing partner of Crescent Capital Group in a joint interview.
Sun Life will acquire the majority stake in Crescent for up to $338 million, made up of a $276 million upfront payment and a future payment of up to $62 million based on the achievement of certain milestones. Crescent's current equity holders will retain carried interests in existing funds, along with certain assets and their respective economic interests.
There is also a put/call option to transfer the remaining interest in Crescent to Sun Life five years after the closing date of the transaction. Until then, Crescent will continue to operate independently under its current leadership including Mr. Chapus and Mark Attanasio, Crescent co-founder and managing partner.
"This is a major milestone for us as an asset manager," Mr. Peacher said in an interview.
SLC Management was formed six years ago with close to $1 billion in seed money from Sun Life Financial. SLC Management now has $193 billion in assets under management.
SLC Management acquired majority interests in infrastructure and real estate manager InfraRed Capital Partners in July. Sun Life also holds a 56% stake in real estate manager BentallGreenOak, which is also part of SLC Management.
"We've had roughly half of our assets invested in alternatives for decades. … We've always found additional yield and return in the private markets," Mr. Peacher said. "We think institutional investors will continue to move in that direction."
Sun Life will co-invest up to $750 million in Crescent's investment strategies, including to help launch new investment offerings. Crescent had $28 billion in AUM as of June 30. It invests in mezzanine debt, middle-market direct lending in the U.S. and Europe, high-yield bonds and broadly syndicated loans.
"Seed capital was a critical component, and distribution support was equally important," Mr. Chapus said in the joint interview. "Currently, we have a blue-ribbon list of global investors. Having said that, there is a ton of white space out in the world."
He added that he expects Sun Life will call the put/call arrangement and retain 100% ownership of Crescent.
"Mark and I are here firmly ensconced in our roles for at least the next five years. We have a deep bench, and we will identify future leadership to ensure Crescent remains a leading alternative asset manager," Mr. Chapus said.
The transaction is expected to close in late 2020. When the deal is completed, Crescent expects to remain the investment adviser of Crescent Capital BDC, pending approval of the business development company's shareholders.