Late Tuesday, Lovell Minnick announced it was selling ALPS for $250 million to DST Systems, a data processing company. The PE firm owned a majority of ALPS while management had the rest, says Spencer Hoffman, a Lovell Minnick MD.
DST–which is also the subject of its own sale rumors– is buying all of ALPS, he says. ALPS will remain a separate company, according to a statement. The sale is expected to close before the end of the year, Hoffman says.
“You can definitely view it as an exciting outcome for all of our clients, management and shareholders,” Hoffman says.
For the unfamiliar, Denver-based ALPS is a third-party administrator that provides back office services, including administration, to hedge funds and mutual funds. ALPS also provides distributions services for their own and third-party ETFs and mutual funds.
ALPs has become one of the fastest growing ETF providers with $1.4 billion in assets, according to the Financial Times. One of its better performing funds is the ALPS Alerian MLP ETFT that was launched last August and is responsible for nearly $600 million of inflows this year, the FT says. ALPS managed more than $3.275 billion in assets as of Dec. 31.
In 2010, ALPS was the subject of several rumors, with most saying Lovell Minnick was looking to sell the company after owning it for 5 years (5 years is the typical hold time at Lovell Minnick, I’m told). A year ago, ALPS was expected to fetch only $150 million.
By the close of the sale, Lovell Minnick will have ended up holding onto ALPS for six years. The PE firm bought a majority stake via a recap in 2005, and has since helped ALPS make a pair of bolt-on acquisitions: Hedge fund administrator Price Meadows in 2008, and the Liberty All-Star closed-end fund business from Bank of America in 2006.
The ALPS auction started earlier this year, I’m told. Morgan Stanley advised on the process. A slew of PE firms–including GTCR–looked at ALPS as well as some strategics. However, DST ended up winning the auction.
Concerns regarding risks in ALPS’s business caused the PE firms to come in with lower offers, one source says. Any buyer of ALPS would need to invest capital in the company’s hedge fund administration business, as well as build out its offshore capabilities, the source says. “DST has some negative trends in their overall business and has a lot of synergies [with ALPS], so they are a natural strategic to own this,” the source says.
With offices in Los Angeles and Philadelphia, Lovell Minnick focuses exclusively on financial services. The PE firm owns stakes in Leerink Swann, the healthcare investment bank, as Duff & Phelps and Mercer Advisors. Lovell Minnick is currently investing out of its third fund which raised $455 million in January 2010. The PE firm, with fund III, will invests $30 million to $80 million per deal.
Terry Sullivan of Morgan Stanley provided financial advice to ALPS. DST was advised by Bill Nook of Deutsche Bank.