European private equity firm CVC Capital Partners has tapped Deutsche Bank as its adviser to buy La Trobe Financial, as bids land with owner Brookfield in just over a week.
With about eight days to go until indicative offers are due for the Morgan Stanley and UBS-advised sale, so far just two suitors have brought in help from investment banks to assist with their proposals.
The other is Warburg Pincus, which DataRoom last week revealed was a bidder, hiring investment bank Goldman Sachs.
The Warburg Pincus tilt at La Trobe will be led by the private equity firm’s Singapore-based managing director, Alex Roso.
The private equity firm describes itself as a leading global growth investor and one of the largest real estate investors in Asia with more than $US83bn of assets under management across its entire business.
Last year, it spent $490m on an investment with private credit asset manager MA Financial to support its real estate credit venture in Australia through its Warburg Pincus Asia Real Estate Fund.
Australia is gaining plenty of attention from CVC, which has more than $333bn of global assets under management.
The private equity firm had largely been on the sidelines for deals in Australia for some time after a 2007 purchase of Nine Entertainment soured.
But now the local leaders of CVC, Richard Blackburn and ex KKR operative and Deutsche banker Boris Dangubic, have plenty of cash that needs to be put to work and are not wasting any time finding opportunities to deploy the capital.
The Wall Street Journal reported in March that CVC, which is listed on the Amsterdam stock exchange, reported €780m ($US850.6m) in pro forma management fee earnings last year – a 40 per cent increase on the previous year.
CVC is poised to buy 45 per cent of the country’s second largest pub operator, Australian Venue Co, from PAG.
AVC, advised by Barrenjoey, makes about $242m in annual earnings before interest, tax, depreciation and amortisation, and is selling the 45 per cent stake for $945m.
PAG bought AVC from Kohlberg Kravis Roberts for $1.4bn last year and the Asian private equity firm had planned to list the business, but later shelved the move.
Sources say Bain Capital is undecided as to whether it will progress with the La Trobe Financial contest, and TA Associates is understood to have bowed out.
A new name mentioned as being around the hoop is global investment firm Sixth Street.
The other party earlier mentioned to be taking a look is Kohlberg Kravis Roberts, although sources say opinion is divided internally about the opportunity.
Challenger looked but walked away, while groups such as Blue Owl and Stone Point are not expected to bid after also looking.
Brookfield purchased La Trobe Financial in 2022 from Blackstone for $1.5bn and has it on the market positioned as an asset manager rather than a non-bank lender and holding firm on its $3bn price aspirations.
About 20 parties were in the data room in the first phase of the contest for the group which provides funds management and mortgage lending services to its customers.
EBITDA has increased from $200m in 2022 to $320m annually and sources say that buyers are being asked to pay over nine times the last number.
Much of its value will be determined by whether buyers ascribe a multiple to the company paid for fund managers rather than those for non-bank lenders, which are typically valued on a multiple of net profit.
Brookfield argues firmly that the business is a fund manager because more than 65 per cent of earnings are from funds management and the remainder is largely from mortgage lending.
The private equity fund also says that more than 80 per cent of its earnings are fee related.
But some market experts say that the funds managed are mortgages, about 75 per cent of which are residential mortgages and the remainder are largely commercial real estate loans.
La Trobe Financial mainly provides home loans over short-term horizons with conservative loan-to-value ratios, funded through warehouse facilities from banks – and in the past the maximum loan to any one borrower was $3.5m.
If buyers pay top dollar for the business, executives at the company will be among those who stand to make big gains from the sale, with Brookfield including about 20 of La Trobe’s managers on its management equity plan.
Chief executive Chris Andrews is understood to have a holding of at least 1.6 per cent of the business.
Market experts believe that La Trobe Financial would find a buyer at $2.3bn but $3bn could be a stretch.
Still, Brookfield silenced its detractors over Aveo who doubted its retirement living business would sell for more than $3bn and yet in recent weeks went on to be purchased by Scape and Korea’s NPS for $3.85bn.
A fallback option has been considered to be an IPO, but non-bank lenders are trading at low multiples, and market sources say that Brookfield’s price aspirations are too ambitious to meet the equities market.
CVC and Warburg Pincus both went head to head earlier this year for the Philippines’ largest private hospital, Metro Pacific Hospital Holdings, The Wall Street Journal reported.
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