Assured Guaranty, a financial guaranty insurer, has announced that its subsidiary Assured Guaranty US Holdings Inc. has reached an agreement to acquire all of the outstanding equity interests in BlueMountain Capital Management, LLC and its associated entities.
The purchase price of the transaction is $160 million, subject to certain adjustments, and not less than $114.8 million of this will be payable in cash. The remainder of the purchase price is payable in cash, common shares, a one-year promissory note, or in a combination of the foregoing.
BlueMountain is an alternative asset management company with $19.3 billion in assets under management (AuM). Under the agreement, BlueMountain’s co-founder, Chief Executive Officer (CEO) and Chief Investment Officer (CIO), Andrew Feldstein, will join Assured Guaranty as CIO and Head of Asset Management, which will include his current responsibilities at BlueMountain.
BlueMountain manages assets across collateralised loan obligations; long-duration opportunity funds that build on its corporate credit, asset-backed finance, infrastructure and healthcare experience; and four relative value hedge funds.
Assured Guaranty’s President and CEO, Dominic Frederico, said: “We have been searching for the right asset management platform for over three years, and we found it in BlueMountain, a seasoned asset management firm with a compatible credit culture, complementary market knowledge and the scale to make a material contribution to Assured Guaranty’s profitability.
“BlueMountain will be our largest and most important investment outside the financial guaranty sector. We expect to allocate a portion of our financial guaranty subsidiaries’ investment portfolios to be managed by our new asset management platform and believe that will drive improvement in our overall investment returns, which should raise the future level of insurance subsidiary permitted dividends.
“The acquisition is consistent with our strategic objective to diversify into fee-based revenue sources, and we expect this platform to be the basis for further development of our presence in the asset management sector. We are delighted that Andrew Feldstein will join Assured Guaranty to execute this strategy.”
Assured Guaranty US has said that it intends to fund the takeover with loans from its subsidiaries Assured Guaranty Municipal Corp., Municipal Assurance Corp. and Assured Guaranty Corp., subject to regulatory approval. The deal is expected to close in the fourth-quarter of 2019.
Feldstein added: “Along with other senior executives of BlueMountain, I enthusiastically look forward to joining Assured Guaranty’s team and leading Assured Guaranty’s asset management initiatives. Assured Guaranty is a well-capitalized, credit-focused financial services group that believes in BlueMountain’s strength and long-term prospects, and it sees alternative asset management as a key element of its long-term strategy.
“Assured Guaranty’s asset management business will capitalize on the many synergies between the companies, including BlueMountain’s significant experience in CLOs, asset securitization, infrastructure investments and health care finance.”