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Equitable Holdings announced that its subsidiary, AllianceBernstein (AB), will acquire CarVal Investors, a global private alternatives investment manager with $14.3 billion in assets under management (AUM). The deal, worth $750 million, will enhance AB's private markets platform to nearly $50 billion in AUM. The acquisition is expected to generate synergies, strengthen AB's position in private credit, and maintain EQH's cash flow at $1.5 billion. The transaction is set to close in Q2 2022 and is neutral to EQH's earnings per share (EPS) in the short term.
Positive
Acquisition expands AB's AUM to nearly $50 billion.
Generates expected synergies and strengthens private credit capabilities.
Transaction maintains company cash flow of $1.5 billion.
Negative
Equity ownership in AB may decrease from 65% to approximately 62%.
NEW YORK--(BUSINESS WIRE)--
Equitable Holdings, Inc. (the “Company”) (NYSE: EQH) announced today that one of its subsidiaries, AllianceBernstein (NYSE: AB), has entered into an agreement to acquire CarVal Investors L.P. (“CarVal”).
CarVal is an established global private alternatives investment manager with $14.3 billion in AUM1, primarily focused on opportunistic and distressed credit, renewable energy infrastructure, specialty finance and transportation investments.
The acquisition of CarVal further enhances Equitable Holding’s differentiated business model, which pairs retirement, asset management and affiliated advice. This transaction expands AB’s higher-multiple private markets platform to nearly $50bn in AUM2 and elevates AB into a leading private credit provider with direct origination capabilities. Additionally, the Company expects to generate synergies following the acquisition. Equitable will allocate $750 million of General Account assets into CarVal strategies to improve risk adjusted returns to policyholders and CarVal will have access to AB’s global distribution platform.
“Even through periods of market volatility, the strength of our business model and balance sheet gives us the flexibility to execute on our strategy to grow our capital-light businesses and generate returns for both our clients and shareholders,” said Mark Pearson, CEO and President of Equitable Holdings. “The transaction strengthens our business model by further enhancing the profile of our leading asset manager and increases long-term growth, all while maintaining $1.5 billion of cashflows.”
The details of the transaction are as follows:
AB has announced a definitive agreement to purchase 100% of CarVal for an upfront purchase price of $750 million and a multi-year earnout if certain targets are reached.
The deal will be funded primarily through the issuance of AB units.
This efficient deal structure has no impact to EQH capital position or cash flows as higher fee revenue from CarVal offsets the change in EQH’s ownership in AB from 65% to c.62%, with the potential to reach c.60% if the full earnout is paid upon certain targets being reached.
The deal is neutral to EQH EPS in the short term and accretive thereafter.
The acquisition is part of the Company’s previously announced strategy to drive increased returns while growing AB’s private markets business through a $10 billion capital commitment, by allocating $750 million of General Account assets to CarVal strategies.
Additionally, the Company’s strong capital position, year-end cash of $1.6 billion at Holdings and the deal structure, which includes a significant portion to be paid through an earnout structure, gives the Company confidence in the transaction in the current market environment. Lastly, CarVal’s differentiated capabilities in distressed credit will provide more opportunities to generate excess returns.
At the transaction closing, expected to occur in the second quarter of 2022, CarVal will become a wholly owned subsidiary of AllianceBernstein L.P. and will be rebranded as AB CarVal Investors. The transaction is subject to customary regulatory and closing conditions. CarVal and its employees will continue to operate from its Minneapolis, Minnesota headquarters and its office locations around the world.
About Equitable Holdings
Equitable Holdings, Inc. (NYSE: EQH) is a financial services holding company comprised of two complementary and well-established principal franchises, Equitable and AllianceBernstein. Founded in 1859, Equitable provides advice, protection and retirement strategies to individuals, families and small businesses. AllianceBernstein is a global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private wealth clients in major world markets. Equitable Holdings has approximately 12,200 employees and financial professionals, $908 billion in assets under management (as of 12/31/2021) and more than 5 million client relationships globally.
About AllianceBernstein
AllianceBernstein is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals, and private wealth clients in major world markets. As of February 28, 2022, AllianceBernstein had $739 billion in assets under management. Additional information about AB may be found on our website, www.alliancebernstein.com.
1AUM of CarVal comprised of approximately $9.9 billion in fee-earning AUM and $4.5 billion in fee-eligible AUM. As of 12/31/2021.
2Pro forma AUM of AB comprised of approximately $37.2 billion in fee-earning AUM and $12.0 billion in fee-eligible AUM. Figures may not sum due to rounding. As of 12/31/2021.
What is the purpose of Equitable's acquisition of CarVal Investors?
The acquisition aims to enhance AllianceBernstein's private markets platform and expand its assets under management, thereby improving growth and returns.
How much is Equitable paying for CarVal Investors?
Equitable is paying $750 million for the acquisition, with potential earnouts based on performance.
When is the acquisition of CarVal expected to close?
The transaction is expected to close in the second quarter of 2022.
What impact will the acquisition have on Equitable's EPS?
The deal is neutral to Equitable's EPS in the short term and is expected to be accretive thereafter.
