Back to top

Image: Bigstock

Equitable Holdings (EQH) Arm to Acquire CarVal for $750M

Read MoreHide Full Article

Equitable Holdings, Inc. (EQH - Free Report) recently announced that it has agreed to acquire alternative investment management firm CarVal Investors L.P. through its subsidiary AllianceBernsteinHolding L.P. (AB - Free Report) .

The acquisition is likely to close in the second quarter of this year, following which CarVal will become an AllianceBernstein subsidiary. The acquiree is expected to be rebranded as AB CarVal Investors. Its workers will remain in the headquarters at Minneapolis, MN.

The acquiree has $14.3 billion in assets under management (AUM). The assets belong to various markets like infrastructure for renewable energy, specialty finance, investments in transportation and others. Of the total AUM value, $9.9 billion is fee-earning while $4.5 billion is in the fee-eligible category. These are expected to complement AllianceBernstein’s portfolio, which had a pro-forma AUM of around $37.2 billion in fee-earning and $12 billion in the fee-eligible category at 2021-end.

The move is in line with Equitable Holdings’ strategy of boosting the differentiated business model and long-term growth. It expects to maintain $1.5 billion of cash flows and recognize significant synergies. The acquisition is expected to expand AllianceBernstein’s private markets platform to almost $50 billion in AUM. The deal will likely enhance its private credit providing capabilities. Equitable Holdings plans to allocate General Account assets worth $750 million in CarVal strategies. This is expected to improve policyholders’ risk-adjusted returns.

Equitable Holdings plans to fund the acquisition by issuing AllianceBernstein units. The partnership will pay $750 million for the acquisition along with a multi-year earnout, subject to several target fulfilments. Higher fee revenues from the acquiree are expected to offset Equitable Holdings’ change in AllianceBernstein ownership.

Even though the deal is not expected to have any impact on EQH’s bottom line in the short run, it will definitely boost the company’s profits in the long run. The Zacks Consensus Estimate for its 2022 bottom line indicates 1.5% year-over-year growth. The same for 2023 implies an 11.7% year-over-year jump. EQH beat earnings estimates thrice in the last four quarters and missed once, with an average surprise of 16.2%. 

Equitable Holdings, Inc. Price and EPS Surprise

Equitable Holdings, Inc. Price and EPS Surprise

Equitable Holdings, Inc. price-eps-surprise | Equitable Holdings, Inc. Quote

Zacks Rank & Key Picks

Equitable Holdings currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Finance space include Gladstone Capital Corporation (GLAD - Free Report) and Alerus Financial Corporation (ALRS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gladstone Capital operates as a business development company and works with small and medium-sized companies. Based in McLean, VA, Gladstone Capital’s bottom line for the current year is expected to rise 8.9% year over year to 86 cents per share. GLAD beat earnings estimates once, met twice and missed on one occasion in the last four quarters, with an average surprise of 7.6%.

Alerus Financial delivers financial products and services to businesses and consumers. Based in Grand Forks, ND, ALRS’ bottom line for 2022 has witnessed three upward revisions and no movement in the opposite direction in the past 60 days. Alerus Financial beat earnings estimates in each of the last four quarters, with an average of 34.6%.