Boston Private Financial Holdings has announced that private equity firm Carlyle Group will invest some USD75m in newly issued equity securities of Boston Private, its US wealth management
Boston Private Financial Holdings has announced that private equity firm Carlyle Group will invest some USD75m in newly issued equity securities of Boston Private, its US wealth management business.
Boston Private has been evaluating alternatives to raise additional capital to strengthen its balance sheet, and Carlyle’s investment is part of a broader capital-raising plan that is expected to generate more than USD185m in new equity capital.
Boston Private also intends to raise around USD85m in a public offering of its common stock and will lower the dividend on its common stock to USD0.01 per quarter, which is expected to generate some USD25m in additional retained equity over the next two years.
‘We are pleased that Carlyle has agreed to become an important shareholder of Boston Private and to make this investment in our firm,’ says chairman and chief executive Timothy Vaill.
‘Carlyle’s investment, combined with our own internal and external reviews, make us confident that we are addressing the current and foreseeable future capital needs of our affiliates. As a result, we can move aggressively to put the Southern California credit problems behind us.
‘In addition, while the current environment presents certain challenges, it is also creating positive growth opportunities for our strong-performing affiliates. This capital raise also ensures that we will have sufficient capital to allow them to pursue those growth opportunities where appropriate.’
Carlyle will purchase two series of non-voting preferred stock, one of which is mandatorily convertible into common stock and the other convertible only with the approval of Boston Private shareholders approve the conversion. Together they will represent approximately 19 per cent of the company’s pro-forma outstanding common shares.
Carlyle will also receive warrants to purchase common stock during the next five years that would bring its stake up to a maximum of 24.99 per cent. John Morton, an executive with 35 years of banking and financial services experience will join Boston Private’s board of directors as Carlyle’s representative.
‘We are thrilled with this opportunity to make a meaningful long-term investment in Boston Private, a franchise we have long believed to be a leader in the high net worth marketplace,’ says Olivier Sarkozy, co-head of Carlyle’s global financial services team.
Randal Quarles, a managing director on the financial services team, adds: ‘In these challenging economic times, we have looked at many investment opportunities in the financial services sector and have seen few that we have found as attractive. We are attracted to Boston Private’s strong history of growth and their diversified business structure that derives revenues not only from the private banking business but from strong fee-based businesses.’
Carlyle had a total of USD82.9bn under management committed to 60 funds at the end of March. Carlyle invests in buyouts, venture and growth capital, real estate and leveraged finance worldwide, focusing on aerospace and defence, automotive and transportation, consumer and retail, energy and power, financial services, healthcare, industrial, infrastructure, technology and business services and telecommunications and media.
Since 1987, the firm has invested USD46.3bn of equity in 802 transactions for a total purchase price of USD216bn, and employs 850 people in 21 countries. In aggregate, Carlyle portfolio companies have more than USD109bn in revenues and employ more than 415,000 people worldwide.
