Franklin Templeton has struck a deal to acquire Alcentra, BNY Mellon’s European credit business for up to $1bn (£790m).
The transaction, which is expected to complete in the first quarter of 2023, will see the BNY Mellon subsidiary absorbed by Franklin Templeton’s US alternative credit specialist investment manager, Benefit Street Partners (BSP), providing it with a toehold in Europe.
Founded in 2002, Alcentra is one of Europe’s largest credit and private debt managers, with $38bn (£30.2bn) in assets under management. Its 180-strong team based in London, New York and Boston manages money for more than 500 institutional investors using a “value-oriented” approach.
Following completion, BSP’s assets will double to $77bn, bringing firmwide alternative assets under management to $275bn (£219bn).
“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,” president and CEO of Franklin Templeton Jenny Johnson (pictured) said.
“Alternative investments represent a significant diversification tool for our clients and an area of increasing importance for both individual and institutional investors.”
Transaction worth up to £790m
The acquisition will be funded from Franklin Templeton’s existing balance sheet and is expected to be immediately accretive to adjusted earnings per share.
The asset manager will pay $350m in cash at close and up to a further $350m depending on certain performance thresholds being met over the next four years.
It has also committed to purchasing all seed capital investments from BNY Mellon related to Alcentra, which were valued at $305m as of 31 March 2022.
BNY Mellon Investment Management said it would continue to offer Alcentra’s capabilities in its sub-advised funds and in select regions via its global distribution platform. It expects the deal to increase its Common Equity Tier 1 capital by $0.5bn.
Hanneke Smits, CEO of BNY Mellon IM, said: “We’re extremely pleased to be strengthening the partnership with Franklin Templeton and continuing 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.”
Alcentra is the latest business to be scooped up by Franklin Templeton in what has been an acquisitive few years for the business. In 2020, it formed a $1.5trn powerhouse after buying Legg Mason and toward the end of last year, it purchased New York alternative manager Lexington Partners.
