Group plc (“Man Group”) announced today that it has entered into a conditional agreement to acquire Silvermine Capital Management LLC (“Silvermine” or the “Company”), a Connecticut-based leveraged loan manager with $3.8 billion of funds under management across nine active collateralised loan obligation (“CLO”) structures as of 30 November 2014 (the “Acquisition”). The Acquisition is expected to complete in the first quarter of 2015, subject to certain approvals being obtained.
Silvermine is wholly-owned by the firm’s founders and senior staff members and is based in Stamford, Connecticut. The team of 17 focuses exclusively on managing US levered credit portfolios and, since inception in 2005, has executed 16 separate transactions totalling $6.7 billion.
Upon completion of the Acquisition, Silvermine will be integrated into Man GLG and will operate under the Man GLG Silvermine name which will complement Man GLG’s existing credit business. Silvermine’s team will remain in place under the leadership of two of the firm’s founders, G. Steven Kalin and Richard F. Kurth, who will continue to work alongside the other co-founders Aaron Meyer and Jonathan Marks.
The Acquisition follows Man Group’s recent acquisitions in the US of Pine Grove Asset Management LLC, Numeric Holdings LLC and the Merrill Lynch Alternative Investments LLC fund of hedge fund portfolio. The strategic rationale for the Acquisition includes:
– Integration of Silvermine’s specialised and high calibre team into Man Group, with long-term experience and expertise in US levered credit;
– Significant enhancement of Man Group’s existing US credit business and global CLO footprint, providing the necessary scale to become a significant player in the US CLO market;
– Further expansion of Man Group’s footprint in the US, utilising Silvermine’s distinct distribution channel through investment banks, and adding to the firm’s investment capabilities; and
– Opportunity for the new Man GLG Silvermine business to leverage Man Group’s infrastructure, banking relationships, distribution capabilities, and balance sheet.
The consideration paid by Man Group is structured to align its interests with Silvermine and comprises:
– An upfront payment of $23.5 million, paid in cash from existing resources upon completion of the transaction;
– Two earn out payments, payable following the first and fifth anniversary of closing, on a sliding scale dependent on levels of run rate management fees at the time:
– After one year, up to $16.5 million; and
– After five years, up to $30 million.
– The earn out payments are expected to be paid in cash, also funded from Man Group’s resources at the time; however Man Group has retained the right to, at its discretion, issue ordinary shares at the then prevailing market price in order to satisfy some or all of the consideration payable.
The regulatory capital requirement associated with the Acquisition is expected to be approximately $45 million. As of 30 November 2014, Silvermine’s run rate management fee revenues and PBT were $17 million and $8 million respectively, based on $3.8 billion in funds under management.
Mark Jones, co-CEO of Man GLG, stated, “The acquisition of Silvermine will transform our existing credit business and position us to benefit from strong demand for US CLOs and other credit strategies. Silvermine is a highly respected, specialised business with an excellent track record of outperformance. As part of Man Group, Silvermine will benefit from our world class infrastructure, distribution and access to capital and we are confident that this acquisition will bring meaningful advantages to our investors by further diversifying our offering.”
Steven Kalin and Richard Kurth, Managing Directors of Silvermine, commented, “We’re excited about the opportunities that joining Man Group will bring to us and to our investors. We have always been focused on identifying opportunities in the credit space that, given their risk/return proposition, deliver attractive performance for our clients. We are pleased to be joining forces with an organisation that not only embraces our firm’s entrepreneurial spirit, but plans to help foster that spirit and collaborate with us to further grow the business”.
Berkshire Capital Securities LLC is acting as financial adviser to Silvermine.