Investment management firm Fortress Investment Group LLC (FIG) said Tuesday that it has agreed to acquire bond investor Logan Circle Partners, L.P. from financial services company Guggenheim Partners, LLC. The deal is part of Fortress' efforts to expand the company's investment management business to offer fixed income products to investors. Logan has approximately $12 billion in assets under management.
Under the terms of the deal, New York-based Fortress will pay about $21 million in cash with the potential for an additional payment at the end of 2011, contingent on the growth and performance of Philadelphia, Pennsylvania-based Logan Circle's business. The transaction is expected to close by the end of the second quarter of 2010 and is subject to customary approvals.
Logan Circle Partners is a joint venture owned by Logan Circle Partners' employees and Guggenheim Partners, LLC, a diversified financial services firm with wealth management, capital markets, investment management and proprietary investing businesses, and more than $100 billion in assets under supervision.
Fortress specializes in alternative investments, with approximately $32 billion in assets under management as of September 30, 2009. The company said it plans to enhance the Logan Circle platform over time to continue to serve an expanded global client base. By acquiring the bond manager, Fortress is looking to broaden its capital base beyond lucrative, but riskier private equity and hedge fund assets.
Daniel Mudd, Fortress's Chief Executive Officer said, "We believe this is a unique opportunity to diversify and expand Fortress's investment management business. Logan Circle has a high quality management team and a fundamental credit focus which is complementary to our existing approach."
Following the closing of the transaction, Jude Driscoll, founder of Logan Circle, and the senior leadership team at Logan will continue to manage the business and will report directly to Mudd.
The deal is the first by Fortress since it named Mudd as its CEO in July 2009. Mudd, a former chief executive officer of Fannie Mae (FNM), is said to have plans to spearhead an acquisition strategy that could see Fortress buy other financial companies, including banks, insurers, traditional money management groups and other hedge funds.
In mid-December, Fortress said it elected not to pay a dividend in the fourth quarter of 2009. The company's board elected to retain capital for potential future investment opportunities and for working capital purposes.
Fortress was co-founded as a private equity firm in 1998 by Wesley Edens. The company was among the first large U.S. alternative-asset managers to pursue an initial public offering, selling stock in February 2007. However, its shares plummeted amid the global credit crisis. Several of the companies owned by Fortress were also negatively impacted by the exposure to the ailing economy of Florida. The acquisition of Logan Circle could bring more stability to Fortress's earnings, which have been volatile.
In early November, Fortress reported a wider net loss for the third quarter as revenues dipped from the prior-year period. The company's GAAP net loss attributable to Class A Shareholders for the third quarter was $58.6 million, wider than $57.44 million a year ago. The loss, on a per share basis, narrowed to $0.43 from $0.66 a year ago on higher share count. Quarterly revenues declined to $143.68 million from $185.14 million in the same period last year.
FIG closed Tuesday's regular trading session at $4.10, up $0.05 or 1.23% on a volume of 1.52 million shares.
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