Baer Eyes IPO or Buyout for U.S. Funds Unit-Sources
By Muralikumar Anantharaman
BOSTON (Reuters) - Swiss private bank Julius Baer Holding AG (BAER.VX) is eyeing an initial public offering or a management-led buyout of its U.S. asset management unit after talks to sell it stalled, industry sources say.
Baer, which said in October it was considering all options, including a sale, for New York-based Julius Baer Investment Management LLC, held talks with Affiliated Managers Group (AMG) (AMG.N) and Legg Mason Inc (LM.N) about a sale but pricing issues derailed the talks, the sources said.
It has now shifted its focus to an IPO, which it has hired Goldman Sachs Group Inc (GS.N) to lead, one source said. Goldman led the recent IPOs of fund managers Pzena Investment Management (PZN.N) and Och-Ziff Capital Management Group (OZM.N).
Goldman Sachs spokeswoman Andrea Rachman declined to comment.
"Julius Baer is exploring an IPO after the initial plan for a trade sale failed on pricing issues," said the source.
The bank is also considering a sale to the unit's management, similar to the sale in January of its UK-based fixed income subsidiary, another source said.
Baer officials in Zurich were not immediately available for comment. Tony Williams, a spokesman for the bank's U.S. arm, did not return calls seeking comment. AMG spokeswoman Laura O'Brien and Legg Mason spokeswoman Mary Athridge said their companies would not comment on market rumors.
Baer's U.S. unit managed $68.6 billion in assets, mostly in equities, as of end-June. Its key products are the Julius Baer International Equity Fund, which is closed to new investors and had $27 billion in net assets as of end-October, and the International Equity Fund II, with $9.7 billion in net assets.
"Generally, trade sales are less lucrative than IPOs are at this point," said Ben Phillips, managing director of Putnam Lovell, a division of Jefferies & Co.
Listed U.S. fund managers trade at about 14 times pretax earnings compared with 11 to 12 times pretax earnings a sale fetches, Phillips said.
Still, the valuations are not low enough to attract buyers, some analysts said.
"While the equity markets have been somewhat volatile since August, we haven't seen that necessarily translate into significantly lower prices for asset managers," said Scott Powers, chief executive of the U.S. business of London-listed insurer and asset manager Old Mutual Plc (OML.L).
Despite shares of Pzena and Och-Ziff falling sharply below their IPO price, some analysts said Julius Baer's unit might escape a similar fate if it listed due to its focus on international equities. A weak dollar and strong performance from overseas markets are causing a surge in international equity investments.
"Recent asset management IPOs haven't gone well. But the market likes very diversified or very core asset management firms. And in the case of Julius Baer, core global equity, which is in high demand, may help find it a more favorable response from the market," said Phillips of Putnam Lovell.
(Additional reporting by Joseph Giannone; Editing by Tim Dobbyn)
