Ross sells out to AMVESCAP for $375m

Fund manager AMVESCAP is buying WL Ross & Co, a US alternative assets manager, to beef up its product line-up for its clients.

AMVESCAP, a global fund management group, is acquiring WL Ross & Co, a financial restructuring group with more than $3.5 billion in assets, for up to $375 million over five years.

Ross: selling up with five-year handcuffs.

The UK company is paying $100 million for WL Ross up front. In addition, it has offered five annual earn-out cash payments, each capped at $55 million. The first payment is guaranteed at $30 million.
Wilbur Ross founded WL Ross in April 2000 as an independent organisation dedicated to private investments and fund management for institutional investors and family offices across the globe. 

The company has sponsored alternative investments including private equity funds, co-investment vehicles and hedge funds in the steel, textile, coal, automotive and financial services industries in the US, UK, France, China, Japan and Korea.
On completion of the acquisition, expected in the fourth quarter of 2006, AMVESCAP’s direct private equity business, INVESCO Private Capital, will be combined into WL Ross and managed by Ross.

In a conference call with reporters Ross said the sale is a sign of where the asset class is headed.

“I believe that this is the pioneering deal in what will be likely be quite a number of similar transactions going forward,” Ross said. “It seemed to both of us that we were entering a period where, since the private equity community has grown from being a kind of cottage industry into what now is a very substancial industry, clearly one is moving toward the direction of institutionalisation of private equity. What that means to us is that there will be some of the big firms perhaps doings initial public offerings, and other firms doing transactions  of this sort.”

Parag Saxena, INVESCO Private Capital’s head, tendered his resignation in March this year. His departure in June followed two other resignations from the firm’s direct investment team. Alessandro Piol left in April and Howard Goldstein in March.

Under Saxena, the firm won a number of mandates, including a $100 million directive from the California State Teachers’ Retirement System last year to invest in up-and coming general partners.

Its fund of funds group, headed by Philip Shaw and Mary Frances Kelley, remains fully staffed.  According to the INVESCO website, Alan Kittner and Esfandiar Lohrasbpour are the remaining general partners in the firm’s direct investments group, and Johnston Evans has resumed his role as a full-time partner.
De Guardiola Advisors and Goldman Sachs acted as financial advisors to AMVESCAP in this transaction. AMVESCAP is financing the transaction using existing cash and borrowings under its credit facility.