Target: Santander Asset Management
Sponsors: Warburg Pincus, General Atlantic LLC
Seller: Banco Santander SA
Banco Santander SA, Spain’s biggest bank, is in exclusive talks with U.S. private equity firms Warburg Pincus and General Atlantic LLC to sell a stake in its asset management business, three people familiar with the discussions told sister news service Reuters. A sale of a stake in the business would give Santander financial backers to expand it, potentially through combinations with other asset managers. It would also help to raise capital, although one of the sources described the plan to sell a stake as more of a strategic move.
The business had €161 billion ($210 billion) of assets under management at the end of March.
Talks over the sale are at an advanced stage, the sources said, but they did not say when the exclusivity period was due to expire. They also declined to comment on the exact size or value of the deal. The private equity firms would most likely be minority partners, one of the people said.
Warburg Pincus and General Atlantic declined to comment. The Spanish bank confirmed that it was in talks over the stake sale, but declined to give further details.
Santander has been looking to bulk up or sell its asset management unit for several years, one of the sources familiar with the current plans, and two others who have worked with the bank before, said. The business was first put on the block in 2008. Earlier talks fell apart when the financial crisis hit and due to differences over price.
“It’s always a tough business to find partners for as there are usually problems over how you split the fees when you try and bring trade partners in and give your clients access to their funds,” one of the sources said. Fund firms are usually sold for around 2.5 or 3 percent of assets under management, although this can vary widely depending on market conditions and the quality of the assets.
Santander, which relies on South America for about half its profit, in April reported a 26 percent drop in first quarter net profit, weighed down by weaker lending income in Brazil and recession in its home market.
The bank has worked on similar partnerships with U.S private equity firms before, including with Warburg. In 2011, Santander booked a $1 billion gain from selling a 25 percent stake in its U.S. consumer finance business to Warburg, Kohlberg Kravis Roberts & Co. and CenterBridge Partners. It is looking to list that business this year.
Sarah White and Sophie Sassard are correspondents for Reuters in Madrid and London, respectively.