Alerian auction to target private equity: sources

The auction of Alerian Capital Management has run into some bumps, two sources said.

Dallas-based Alerian went up for sale in May, according to sources. Deutsche Bank was tapped to advise on the auction.

The current sale of Alerian targeted strategics and the company was seeking bids of $1 billion, sources said. Proposals came in low, around $600 million, one of the people said.

“It’s a very nichey index and the energy space has gotten crushed,” a different source said.

Alerian is opening up the auction and will be focusing on private equity firms, sources said. A third source, a PE executive, said the logic for targeting PE is flawed. Private equity firms typically cannot compete with strategics in M&A.

“Strategics can’t bid high enough [for Alerian] and the expectations are that PE will bid higher,” the source said. “That’s the inverse of what has been happening for most of history of PE.”

Bloomberg News in November 2014 reported that Alerian was in the early stages of exploring a sale and was interviewing bankers.

Founded in 2004, Alerian provides indexes that track energy and infrastructure companies. Total assets linked to the Alerian Index Series exceeded $19 billion through the firm’s exchange-traded products, delta one notes and separately managed accounts, the firm said on its website.

Alerian spun off its asset management business, SteelPath Capital, in 2010 so it could focus on its Master Limited Partnership (MLP) and energy infrastructure indexes, the firm’s website said. OppenheimerFunds Inc. acquired Steelpath in December 2012, which was renamed OFI SteelPath Inc.

Executives for Deutsche Bank declined comment. Alerian couldn’t be reached for comment.

Action Item: See Alerian’s growth timeline from inception to today.

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