Franklin Templeton, a global investment management firm, has agreed to acquire BNY Alcentra Group, one of the largest European credit and private debt managers, from BNY Mellon.
The transaction is expected to be completed early in the first calendar quarter of 2023, subject to customary closing conditions, including certain regulatory approvals.
Franklin Templeton will pay $350m in cash at close and up to a further $350m in contingent consideration dependent on the achievement of certain performance thresholds over the next four years.
The acquisition will be funded from Franklin Templeton’s existing balance sheet resources and is expected to be immediately accretive to adjusted earnings per share.
In addition, Franklin Templeton has committed to purchase all seed capital investments from BNY Mellon related to Alcentra which, as of March 31, 2022, were valued at approximately $305m.
The seed capital investments will be valued at the time of close to determine the final seed capital purchase amount.
Through this acquisition, Franklin Templeton’s U.S. alternative credit specialist investment manager, Benefit Street Partners (BSP), will expand its alternative credit capabilities and presence in Europe, doubling its assets under management to $77bn globally.
The transaction will also continue to strengthen the breadth and scale of Franklin Templeton’s alternative asset strategies and brings firm-wide alternative assets under management to $257bn after the transaction closes.
Jenny Johnson, President and CEO of Franklin Templeton, said: “We have been deliberate in building our alternative asset management capabilities over recent years and the acquisition of Alcentra is an important aspect of our alternative asset strategy – the expansion into alternative European credit.”
“Alternative investments represent a significant diversification tool for our clients and an area of increasing importance for both individual and institutional investors. This acquisition expands our long-standing relationship with BNY Mellon, and we are pleased that the structure of the transaction achieves objectives for both Franklin Templeton and BNY Mellon in the context of current market conditions.”
Founded in 2002, Alcentra employs a disciplined, value-oriented approach to evaluating individual investments and constructing portfolios across its investment strategies on behalf of more than 500 institutional investors. Alcentra’s dedicated and highly experienced team of approximately 180 professionals is based in its London headquarters, as well as in New York and Boston.
Alcentra has $38bn in assets under management with global expertise in senior secured loans, high yield bonds, private credit, structured credit, special situations and multi-strategy credit strategies.
Jon DeSimone, CEO of Alcentra, said: “BNY Mellon has provided strong support over the years and has contributed significantly to our growth with assets under management doubling since 2014. The global combination of Franklin Templeton and BSP’s highly complementary capabilities will enable us to collectively provide clients with solutions across the credit spectrum.”
Upon closing, BNY Mellon Investment Management will continue to offer Alcentra’s capabilities in BNY Mellon’s sub-advised funds and in select regions via its global distribution platform, and BNY Mellon will provide Alcentra with ongoing asset servicing support.
At close, BNY Mellon expects the transaction to increase BNY Mellon’s Common Equity Tier 1 capital by approximately $0.5bn.
Morgan Stanley & Co. LLC and UBS Investment Bank served as financial advisors to Franklin Templeton and Willkie Farr & Gallagher LLP served as legal counsel.
Ardea Partners served as financial advisor to BNY Mellon and Sullivan & Cromwell LLP served as legal counsel.
Tom Gahan, CEO of BSP and Head of Franklin Templeton Alternatives, said: “We believe the addition of Alcentra will elevate Franklin Templeton and BSP to a leading position in global alternative credit.”
“Alcentra is highly complementary to our existing U.S. capabilities, with no overlap in Europe. This partnership will unlock new opportunities to offer broader global credit solutions to our clients who are increasingly allocating capital to this growing asset class. We look forward to working closely with the Alcentra team.”