Franklin Templeton, a global investment management organisation, has entered into an agreement to purchase Alcentra, Bank of New York Mellon Corp's European credit investment arm, in a deal valued at up to $700 million.

 

The transaction is expected to close in the first quarter of 2023. 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. 

 

Franklin Templeton will pay $350 million in cash at closing, and up to a further $350 million that is contingent upon meeting certain performance thresholds over the next four years, a release said. 

 

Seed capital investments

Also, Franklin Templeton will purchase all seed capital investments related to Alcentra, the amount of which will be determined at the time of closing. As of March 31, seed capital investments were valued at about $305 million, the release said.

 

The acquisition will double the worldwide assets under management of Franklin Templeton's alternative credit specialist unit, Benefit Street Partners, to $77 billion.

 

The transaction will also continue to strengthen the breadth and scale of Franklin Templeton’s alternative asset strategies and brings firmwide alternative assets under management to $257 billion after the transaction closes.

 

Building alternative assets

“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,” said Jenny Johnson, President and CEO of Franklin Templeton. 

 

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 $0.5 billion.

 

Value-oriented approach

Founded in 2002, Alcentra, one of Europe’s largest and longest tenured managers of private debt with $38 billion in assets under management as of April 30, 2022, 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.

 

Tom Gahan, CEO of BSP and Head of Franklin Templeton Alternatives, added: “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 US 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.”

 

Hanneke Smits, CEO of BNY Mellon Investment Management, said: “We will strengthen the partnership with Franklin Templeton and continue to offer Alcentra’s credit capabilities as part of the broad range of alternative solutions we already offer today. We look forward to ongoing collaboration with the combined institution through distribution and further building on BNY Mellon's existing asset servicing arrangement.”

 

New chapter

Jon DeSimone, CEO of Alcentra, added: “Today’s announcement is the beginning of an exciting new chapter for Alcentra as a dynamic credit partner for our investors. 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.”

 

Morgan Stanley & Co 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.-- TradeArabia News Service