American Beacon may be too expensive for PE

American Beacon Advisors’ high price tag is causing some private equity bidders to back away, three sources said.

Fort Worth, Texas-based American Beacon is seeking bids in the high $600 million to $700 million range, two sources said. The mutual fund company produces EBITDA of $50 million to $60 million, one of the people said.

“We are interested in buying the business but don’t think it’s a 12x business,” said one PE executive who is no longer vying for American Beacon.

“That’s a really big price,” a second PE executive said. “To pay that amount, it would be more likely a strategic who wins. It would be hard to see how a PE firm justifies that valuation without some level of revenue or cost synergies.”

Interested parties could include Old Mutual, Affiliated Managers Group and Virtus Investment Partners, a third PE executive said.

Still a fourth source thinks private equity will be interested. Potential bidders could include Lightyear Capital, Clayton Dubilier & Rice as well as Altamont Partners. Sources pointed to Altamont’s hiring of David Odenath, ex-Senior VP and head of Americas at Legg Mason, in September to pursue financial services investments. The Carlyle Group, which acquired TCW in 2013, would also be a logical buyer, a different source said.

But Hellman & Friedman, which has also invested in asset managers, likely wouldn’t be interested. American Beacon isn’t that big of a business, a PE source said.

In September, Reuters reported that American Beacon, which is backed by Pharos Capital Group LLC and TPG Capital, was up for sale. J.P. Morgan Chase & Co. is advising on the auction, the story said.

American Beacon had $60.1 billion in assets under management as of June 30. In 2008, AMR Corp. sold American Beacon to Pharos and TPG in a $480 million deal. AMR retained a 10 percent stake, press reports said.

Executives for American Beacon,Old Mutual, TPG, Carlyle, Virtus, Hellman & Friedman, Pharos and Lightyear declined comment. Altamont, Affiliated Managers Group, and CD&R couldn’t be reached for comment.

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