Santander sells fund unit stake to Warburg, General Atlantic

BANCE SANTANDER SA has agreed to sell half of its asset-management division to U.S. buyout firms Warburg Pincus LLC and General Atlantic LLC.
Posted 5/31/13

MADRID – Banco Santander SA agreed to sell half of its asset-management division to U.S. buyout firms Warburg Pincus LLC and General Atlantic LLC in a deal that values the unit at 2.05 billion euros ($2.67 billion), the latest disposal by Spain’s largest bank as it bolsters capital.

The buyout firms will own 50 percent of a holding company that will integrate Santander’s 11 asset-management companies, mainly in Europe and Latin America, the Santander, Spain-based lender said yesterday in a filing to regulators. The bank will book a 700 million-euro net capital gain.

Santander has been selling assets, including a stake in its Mexican bank last year and its Colombian lender in 2011, to replenish capital buffers that have been depleted by losses on Spanish real estate holdings. As Spain’s economic slump grinds on into a sixth year, banks face mounting bad loans and the task of covering eventual losses on the 208 billion euros of loans they have refinanced or restructured.

“In the short term, it gives them a way to create an additional buffer to absorb the extra provisions they will have because of the situation in Spain,” said Daragh Quinn, an analyst at Nomura International in Madrid, who rates Santander reduce. “There’s still a question mark over loss recognition.”

Deal multiples

Santander fell 1 percent to 5.53 euros by 11:10 a.m. in Madrid trading, extending this year’s decline to 9.3 percent. That compares with a 9.1 percent gain in the Bloomberg Europe Banks and Financial Services Index, which tracks 40 companies.

Jeffrey Smith, a Warburg spokesman, said he had no comment beyond Santander’s statement. General Atlantic’s Patricia Hedley didn’t respond to a request for comment. Santander Asset Management oversees 152 billion euros.

For the purposes of the transaction, Santander expects the unit will have 160 billion euros of assets under management at the end of 2013, earning 364 million euros of net management fees to yield 155 million euros of after-tax profit, the bank said in a presentation posted on its website today.

The deal is valued at 6.2 times estimated 2013 book value for the unit of 285 million euros, and 12.9 times net income after tax, the bank said.

Santander’s former chief executive officer, Alfredo Saenz, said in an April 25 news conference that the bank was in talks over its asset-management business with potential partners that may be interested in participating in a bigger project.

Capital goal

Chairman Emilio Botin told shareholders in March that Santander would have a core Tier 1 capital ratio, a measure of financial strength, of 8 percent at the end of this year if Basel III rules were fully imposed.

The deal announced yesterday will enable the unit to compete with leading international asset managers and Santander expects it will double its business volume in five years, the bank said. Santander plans to keep the remaining 50 percent of the division.

“This transaction will give Santander Asset Management a broader international profile and provide excellent opportunities for growth,” Juan Alcaraz, the unit’s CEO, said in a statement.

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