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Affiliated Managers (AMG) to Sell Baring Private Equity Stake

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Affiliated Managers Group, Inc. (AMG - Free Report) announced that it entered an agreement to sell its minority interest in Baring Private Equity Asia (“BPEA”) to EQT AB, following the announcement of a combination of the two companies.

Yesterday, EQT announced an agreement to acquire BPEA for €6.8 billion, consisting of 191.2 million new ordinary EQT shares valued at €5.3 billion and €1.5 billion in cash.

Per AMG’s terms of the agreement, the company will receive total consideration of a whopping $1.1 billion (based on the EQT closing share price on Mar 15, 2022), including $240 million in cash and 28.68 million of EQT ordinary shares. Affiliated Managers will also retain future carry in certain existing funds.

AMG expects the investment to contribute around $35 million in EBITDA in the ongoing year. It had acquired a 15% interest in BPEA for $187.5 million in 2016, and, hence, the $1.1-billion consideration to be received reflects a significant increase from its purchase price.

The transaction is anticipated to close in fourth-quarter 2022, subject to customary closing norms. Following the closing, AMG expects to utilize around 40% of the gross proceeds to pay taxes and repay debt. The remaining 60% is expected to be used to fund a combination of growth investments and share buybacks over time.

As of Dec 31, 2021, the company had total debt worth $2.49 billion and no debt maturities until 2024. The repayment of debt is expected to reduce interest expenses and alleviate bottom-line pressure.

The company has a strong balance sheet and liquidity position, indicating its ability to invest in other companies and generate meaningful growth through new investments. AMG is targeting investments in alternatives and global strategies, given the strong preference of investors for the same. This is likely to keep supporting the company’s profitability.

The allocation of proceeds to fund share buybacks also indicates its efforts to enhance shareholder value through consistent capital deployment activities. In 2021, the company repurchased shares worth $150 million. Last month, it increased the share buyback authorization to 5.1 million shares. Such encouraging capital deployment moves will improve investor confidence in the stock.

Of late, a number of finance companies, including FB Financial Corporation (FBK - Free Report) , First Business Financial Services, Inc. (FBIZ - Free Report) and Southside Bancshares, Inc. (SBSI - Free Report) , have boosted their capital deployment strategies.

FB Financial recently announced a stock repurchase program of up to $100 million of the outstanding common stock of the company. The repurchase plan expires on Jan 31, 2024.

Share buybacks aside, FB Financial has been regularly paying quarterly dividends. FBK hiked its quarterly dividend in January 2022 by 18% to 13 cents per share.

First Business Financial’sboard of directors approved the repurchase of FBIZ’s outstanding stock, with a maximum aggregate purchase price of $5 million. The program will expire on Mar 4, 2023.

Prior to this, on Jan 28, 2021, FBIZ’s board of directors approved a similar $5-million share repurchase program through Jan 31, 2022. This January, FBIZ sequentially hiked its quarterly dividend by 10% to 19.75 cents per share.

Southside Bancshares’ board of directors approved the repurchase of up to 1 million of SBSI’s outstanding shares. This new share buyback authorization comes with no expiration date.

On Feb 3, 2022, Southside Bancshares announced a quarterly dividend of 34 cents per share, marking a 3% sequential hike.  A special cash dividend of 6 cents per share was paid out in December 2021.