PCG Asset Management, the beleaguered private equity advisory firm, announced it agreed to sell an 80 percent stake in the firm, including a stake controlled by its controversial founder Christopher Bower, to Mitsubishi Corp. The management team will own the remaining 20 percent of the firm, which employs 25 people.
The Japanese company has been a partner of PCG Asset Management since 1998. A sale price was not disclosed.
As part of the sale, the firm will be renamed TorreyCove Capital Partners and be run by David Fann, its current president and chief executive. TorreyCove will separate from its current parent company, Pacific Corporate Group Holdings, and become a subsidiary of Mitsubishi.
TorreyCove will have no affiliation with Bower, who will retain ownership of the PCG name. In addition, Bower and PCG Holdings will leave the building where the two units currently operate. Bower did not return calls requesting comment. In an interview with Buyouts, Fann said a new name was chosen for the simple reason that it was a new company. The firm’s new name comes, in part, from the Torrey Pine, a tree native to LaJolla, Calif., where the firm is headquartered.
Word of a possible sale has circulated for months. Fann initially revealed that a sale would take place in a presentation to the Illinois Teachers Retirement System, which nearly dropped PCG Asset Management as its adviser in 2006 after the executive assigned to advise the pension unexpectedly left the firm. In discussing the firm’s sale with TRS of Illinois, Fann said, “They’re our clients, and we have an obligation to disclose material events.”
In California, PCG Asset Management was hurt by Bower’s association with Alfred Villalobos, a placement agent and former board member of the California Public Employees Retirement System. Villalobos was allegedly at the heart of CalPERS’s “pay-to-play” scandal. The scandal hurt PCG Asset Management’s reputation among pensions who have moved to distance themselves from any hint of controversy regarding the recent pay to play scandals at CalPERS, the New York Common Retirement Fund and the New Mexico State Investment Council.
For several years, until October 2010, PCG Asset Management had been CalPERS’s primary private equity advisor. But the giant pension fund dropped the firm in the wake of its scandal. In 2007, according to the Sacramento Bee, Bower successfully encouraged CalPERS to invest $600 million in Apollo Global Management. In return for that investment, Villalobos, who was friendly with Bower, was paid $13 million in commissions.
Key to PCG Asset Management’s sale to Mitsubishi, said a source with deep knowledge of the firm, was the firm’s roster of remaining clients, which include the Oregon State Investment Council, Illinois Teachers Retirement System, as well as some municipal pensions in New York City.
But despite Bower’s controversial stewardship of PCG, Fann said “my relationship with Chris is positive and we part friends. We wish him well.”