Sterling Capital Management LLC to be acquired by Guardian Capital Group Limited

Rhea-AI Summary

Guardian Capital Group Limited (TSX:GCG) announced the acquisition of Sterling Capital Management LLC from Truist Financial Corporation (NYSE: TFC) for $70MM, expanding Guardian's scale as a global asset manager and adding $76B in assets under management. The transaction is expected to close in Q2, 2024, allowing Sterling to operate as a standalone entity under Guardian's oversight.

Insights

Financial Analyst

The acquisition of Sterling Capital Management LLC by Guardian Capital Group Limited is a strategic move that enhances Guardian's assets under management (AUM) by approximately $76B. The financial terms, including the initial $70MM cash payment and additional earn-out incentives, suggest a valuation that reflects Sterling's established market presence and potential for growth. It's vital to compare this acquisition cost against the AUM to assess the deal's value. In recent transactions within the asset management sector, the purchase price as a percentage of AUM can serve as a benchmark for evaluating the acquisition's financial soundness.

Investors should consider the implications of this deal on Guardian's balance sheet and earnings potential. The immediate impact on earnings per share (EPS) will depend on the integration costs and how quickly Guardian can realize synergies. The long-term benefits, however, may include increased market share, diversification of investment products and enhanced revenue streams through cross-selling opportunities with Truist's client base.

Market Research Analyst

The asset management industry is highly competitive and scale can be a critical factor in achieving cost efficiencies and attracting institutional clients. Guardian's acquisition of Sterling represents a significant increase in scale, which could improve its competitive positioning. The mention of Sterling's separate accounts, model portfolios and commingled vehicles, such as mutual funds, indicates a broadening of Guardian's product offerings. This diversification is essential as it allows Guardian to cater to a wider range of investor preferences and market segments.

Additionally, the strategic partnership with Truist suggests potential for maintaining and leveraging existing client relationships, which could facilitate smoother integration and client retention. The industry trend has been leaning towards consolidation and this acquisition is aligned with that trend, potentially setting Guardian up for a stronger market presence in the United States.

Legal Expert

The acquisition process is subject to normal consents and approvals, which typically involve regulatory scrutiny to ensure compliance with financial regulations and to address any antitrust concerns. The involvement of reputable legal advisors, such as Pryor Cashman LLP and Davis Polk & Wardwell LLP, indicates a thorough due diligence process and negotiation of complex legal terms. It is crucial for stakeholders to monitor the progress of these approvals, as any regulatory hurdles could delay or impact the terms of the transaction.

Moreover, the structure of the deal, with future earn-out incentives, suggests a performance-based component to the acquisition price, which can align the interests of Sterling's current management with those of Guardian post-acquisition. This structure is often used to mitigate risk and incentivize the continued success of the acquired entity.

CHARLOTTE, N.C., Feb. 2, 2024 /PRNewswire/ -- Guardian Capital Group Limited (Guardian) (TSX:GCG) (TSX:GCG.A) announced today that it has reached an agreement under which Guardian's wholly-owned subsidiary Guardian Capital LLC will acquire Sterling Capital Management LLC (Sterling) from Truist Financial Corporation (Truist) (NYSE: TFC).

Headquartered in Charlotte, North Carolina, Sterling traces its origins as an independent investment manager to 1970. Sterling's rich pedigree has allowed it to expand a successful business that today has approximately $76B in assets under management and advisement. Sterling invests on behalf of a broad range of institutional and individual investors through separate accounts, model portfolios, and commingled vehicles, including mutual funds.

The financial terms of the transaction include a payment of $70MM on closing to purchase 100% of the equity capital of Sterling, subject to customary purchase price adjustments, and future earn-out incentives.

"We are thrilled for this new chapter for Sterling Capital and the opportunities for growth that this transition provides," said Scott Haenni, CEO of Sterling Capital. "This path forward is a win-win-win for Sterling Capital, Guardian, and Truist, as it allows Sterling Capital to grow as an independently-managed investment management firm poised for continued long-term growth under Guardian's strategic oversight while continuing to partner with Truist on shared relationships and opportunities. We are thankful to have found a like-minded organization in Guardian that shares our culture and values, and we are excited for our future success together."

"We are very excited to have Sterling join the Guardian group of companies as the acquisition significantly enhances our overall scale as a global asset manager and expands our platform for future growth. Sterling's pursuit of excellence aligns perfectly with Guardian's commitment to investment quality and innovation. Sterling shares and complements our approach and values in addition to adding new capabilities and investment strategies that enhance our offering in the United States," said George Mavroudis, President and Chief Executive Officer of Guardian. "We are extremely grateful that both Sterling and Truist have entrusted Guardian as their partner of choice to build on the rich traditions of both institutions. Our combined organizations share a strong common culture that prioritizes the interest of our clients and strives towards enriching lives together."

Following the anticipated closing of the transaction in Q2, 2024 (subject to normal consents and approvals for transactions of this nature), Guardian plans to operate Sterling as a standalone entity, led by the current team of management and senior professionals, providing continuity, stability and continued excellence for Sterling clients.

Cambridge International Partners LLC served as Guardian's financial advisors, Pryor Cashman LLP provided legal counsel to Guardian, and Cherry Bekaert LLP provide tax advice to Guardian. BofA Securities acted as exclusive financial advisor, and Davis Polk & Wardwell LLP provided legal advice to Truist.

About Sterling Capital Management LLC
Sterling Capital Management LLC, founded in 1970, is an independently-operated subsidiary of Truist Financial Corporation. As of December 31, 2023, Sterling Capital had over $76B in assets under management and advisement. Headquartered in Charlotte, Sterling Capital provides investment advisory services through mutual funds, separately managed accounts, model portfolios, and other commingled vehicles offered through a variety of intermediary and managed account platforms. Sterling Capital's six distinct investment teams provide a full complement of fixed income, concentrated active equity, and multi-asset solutions. Learn more at sterlingcapital.com.

About Guardian Capital Group Limited
Guardian is a global investment management company servicing institutional, retail and private clients through its subsidiaries. As of September 30, 2023, Guardian had $42B ($56.2B CAD) of total client assets while managing a proprietary investment portfolio with a fair market value of $1B ($1.28B CAD). Founded in 1962, Guardian's reputation for steady growth, long-term relationships and its core values of authenticity, integrity, stability and trustworthiness have been key to its success over six decades. Its Common and Class A shares are listed on the TSX as GCG and GCG.A, respectively. To learn more about Guardian, visit www.guardiancapital.com.

About Truist Financial Corporation
Truist Financial Corporation is a purpose-driven financial services company committed to inspiring and building better lives and communities. As a leading U.S. commercial bank, Truist has leading market share in many of the high-growth markets across the country. Truist offers a wide range of products and services through our wholesale and consumer businesses, including consumer and small business banking, commercial banking, corporate and investment banking, insurance, wealth management, payments, and specialized lending businesses. Headquartered in Charlotte, North Carolina, Truist is a top-10 commercial bank with total assets of $535B as of December 31, 2023. Truist Bank, Member FDIC. Learn more at Truist.com.

Important Information & Disclosures
Investment advisory services are available through Sterling Capital Management LLC (SCM), an investment adviser registered with the U.S. Securities & Exchange Commission and an independently-operated subsidiary of Truist Financial Corporation. SCM manages customized investment portfolios, provides asset allocation analysis and offers other investment-related services to affluent individuals and businesses. Securities and other investments held in investment management or investment advisory accounts at SCM are not deposits or other obligations of Truist Financial Corporation, Truist Bank or any affiliate, are not guaranteed by Truist Bank or any other bank, are not insured by the FDIC or any other federal government agency, and are subject to investment risk, including possible loss of principal invested. SCM's preliminary assets under advisement (AUA) differs from our regulatory assets under management for which we provide continuous and regular investment management services as disclosed in our ADV. AUA generally refers to non-discretionary assets for which SCM provides advice or consultation for which SCM does not have authority to effectuate transactions. Such services include model portfolios and assets SCM advises as an outsourced Chief Investment Officer on a non-discretionary basis.

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SOURCE Sterling Capital Management LLC

FAQ

What is the ticker symbol for Guardian Capital Group Limited?

The ticker symbol for Guardian Capital Group Limited is GCG.

What is the financial terms of the transaction?

The financial terms include a payment of $70MM on closing to purchase 100% of the equity capital of Sterling, subject to customary purchase price adjustments, and future earn-out incentives.

What is the expected closing date of the transaction?

The anticipated closing of the transaction is in Q2, 2024, subject to normal consents and approvals for transactions of this nature.

Who will lead Sterling as a standalone entity after the transaction?

Guardian plans to operate Sterling as a standalone entity, led by the current team of management and senior professionals, providing continuity, stability, and continued excellence for Sterling clients.