Thu, 06/12/2007 - 06:00
Private bank EFG International, part of Swiss-based bank EFG Group, is to buy Marble Bar Asset Management, a UK-based alternative asset manager. EFG International's sister company, Eurobank EFG, is participating by way of a minority stake of 9.99 per cent. Completion is expected in early 2008.
The transaction involves an initial consideration of USD517m in cash. Of this, the amount due to Marble Bar partners and staff of circa USD400m, net of tax, is to be invested in Marble Bar's funds with a staggered lock-up for six years. Expected future payments are in the range USD300m-USD800m (from the amount due to Marble Bar partners and staff, 30 per cent is to be invested in EFG International shares), subject to performance over a six year period.
There is also conditional provision for long-term equity incentives for key Marble Bar partners, involving an equity stake of up to 20 per cent. The terms of the transaction are in keeping with EFG International's publicly stated acquisition criteria, in this case a price-earnings ratio of less than 10.
Established in 2002, Marble Bar has two founding partners - Hilton Nathanson, chief investment officer and Gilad Hayeem, chief executive - who are part of a seven-person senior management team and have an investment track record dating back to 1998.
EFG International has known of, and invested in, Marble Bar since the latter's inception. The founding partners, senior management team, and other key personnel will remain in place. Overall, Marble Bar has 70 employees, the majority of whom are based in London.
Marble Bar is an investment manager specialising in long/short equity strategies, serving institutional clients as well as ultra-high net worth individuals. Clients' assets under management are circa USD4.4bn (CHF 4.9bn).
Its approach is distinctive, combining sophisticated analysis using a proprietary stock screening tool with a discretionary trading overlay based on the experience of Marble Bar's senior fund managers and its analysis team. Its investment strategy is to achieve relatively low volatility and low correlation to equity markets through low-leverage funds, a high level of diversification, and with a targeted performance in the range 12- 15 per cent a year, net of fees. Marble Bar funds have consistently performed among the industry leaders on a risk-adjusted basis.
Marble Bar manages four fund families, and all are characterised by consistently positive performance in keeping with its approach and objectives. Since the establishment of the first fund nearly ten years ago, annual compound returns for each of the fund categories have, since inception, been in the range 13-19 per cent.
Eurobank EFG will take a minority stake of 9.99 per cent in Marble Bar. The strategic drivers underlying this investment include extending the range of alternative investment products to select clients, and the potential for future synergies between EFG International and Eurobank EFG in the area of investment management.
For EFG International says the rationale underpinning the purchase of Marble Bar is multidimensional. Marble Bar has proven itself over a number of years, and has been consistently profitable. Its anticipated net profit for 2008 is at least USD80m - USD100m. EFG International believes that Marble Bar is a sustainable business with growth potential.
Furthermore, in the area of alternative investments, EFG International is able to draw on both its successful experience with C.M. Advisors (an asset management business specialising in funds of hedge funds portfolios), which it acquired in 2006, and for which profits have more than doubled compared to initial expectations, as well as its other hedge fund activities.
There is a growing appetite among clients of EFG International for value-added, internally generated solutions in fast-moving and complex areas such as structured products, hedge funds and derivatives. However, says EFG, the lion's share of investment solutions will continue to be sourced externally, and there will be no compulsion to favour internal solutions.
In general, EFG International is seeing increased recognition and business generation among the wealthiest client segments, and a number of recent acquisitions (PRS Group, Quesada, and Bull Wealth Management) have had successful high-end niches.
For its part, Marble Bar will bring a number of ultra high net worth individuals as clients (circa 30 per cent of its assets under management relate to high net worth individuals/family offices), and its offering and capabilities will help EFG International to broaden further its appeal among this segment.
Marble Bar will complement existing hedge fund capabilities within EFG International, including C.M. Advisors; the ability to advise on hedge fund selection; and advisory and discretionary portfolio management based on hedge funds as a specialist asset class or as part of a rounded portfolio. With the addition of Marble Bar's total client assets relating to hedge funds will be in the region of CHF 15 bn, around 18 per cent of total revenue-generating clients' assets under management.
Rudy van den Steen, chief financial officer and head of M&A, EFG International comments: 'This transaction is a good example of our acquisition philosophy, combining a compelling strategic rationale, pricing discipline and a commitment to shareholder value creation. It has also been structured in a way that aligns the interests of EFG International and the Marble Bar team, in line with EFG's entrepreneurial business model and with a focus on maximising value in the long term. This involves significant performance-based earn-out payments over a period of years, followed by the provision for an ongoing equity interest.'
Hilton Nathanson, chief investment officer of Marble Bar says: 'Marble Bar and EFG share a strong entrepreneurial culture. The transaction aligns Marble Bar closely with its investors and preserves Marble Bar's philosophy, culture and freedom to invest. This strategic transaction was entered into and agreed on the basis that the principles which we have developed over the last 10 years will be protected and enhanced by the structure of the transaction.'
Gilad Hayeem, chief executive officer, Marble Bar Asset Management says: 'As a result of the transaction, we are aligned more clearly than ever with our investors to the performance of our funds. Going forward, everyone who currently works at Marble Bar will have a share of their proceeds from the transaction invested in our funds for at least six years. Over the past ten years, Marble Bar has become an established and robust platform and we have been fortunate to do that with a very supportive investor base. The partnership with EFG positions us ideally for the next phase in our development.'
EFG International is a global private banking group offering private banking and asset management services, headquartered in Zurich. EFG International's group of private banking businesses currently operate in 46 locations in 30 countries, with around 1,800 employees. EFG's shares are listed on the SWX Swiss Exchange. Eurobank EFG Group is an international banking organisation with total assets of over EUR63.3bn. It employs over 21,000 people, with a network of 15,000 branches and points of sale, as well as alternative distribution channels.
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