Warburg and GA seal €2bn Santander carve-out

Warburg Pincus and General Atlantic have bought 50 percent of Santander Asset Management (SAM), the asset management unit of the eurozone’s largest lender by market capitalisation. The unit houses infrastructure, mezzanine and funds of funds teams. The unit's latest vehicle is Santander Mezzanine Fund, which closed on €200 million in September 2012. 

The stake will be held through a holding company that will integrate the 11 asset management companies Banco Santander currently operates in Europe and Latin America. The lender will retain a 50 percent ownership of the business.

The transaction, still subject to regulatory clearance, values SAM at more than €2 billion. It is due to bring €700 million in capital gains to Banco Santander, and aims to provide its asset management unit with further ammunitions to compete on international markets.

The revamped SAM will look to increase its business in the global institutional market, the area where it sees the greatest scope for growth. The unit, which currently manages around €152 billion, ambitions to double its asset under management within the next five years.

SAM’s new private equity owners have a history of investing in financial institutions. Warburg Pincus invested in Mellon Bank as early as 1988, and has since backed institutions including Sterling Financial Corp, National Penn Bancshares, Webster Bank and Primerica. It has already partnered with Santander in the past, when it injected $1 billion in Santander Consumer USA, the bank’s US automotive finance lending business, in October 2011.

General Atlantic’s portfolio comprises a dozen financial services company, a good number of which are based in Latin America and the US. It recently invested in XP Investimientos, a Brazilian broker, Sura Asset Management, a Colombian investment firm, and Oak Hill Advisors, a New York-based asset manager.

The move comes as a number of large financial institutions, confronted with new regulation that require them to hold more equity against risky parts of their business, step up their effort to raise fresh capital. It follows divestments by bank and insurance groups on both sides of the Atlantic, including Bank of America, Citigroup, Lloyds, Groupama and BNP, from part of their non-core divisions.

Santander, both a commercial and retail bank, had close to €1.4 trillion of managed funds by the end of 2012. It operates nearly 14,400 branches, which it claims is more than any other international lender, and has 187,000 employees.