Carlyle may look to exit TCW: sources

Four years after buying a majority of TCW Group Inc, Carlyle Group may seek to sell its stake in the asset manager, according to three sources.

The buyout shop has hired Goldman Sachs to explore options, people said. Carlyle will likely opt to offload a minority of TCW, the people said.

Carlyle has yet to decide what it will do with TCW, another person, not one of the three, said. The firm has spoken to several parties over the years but “nothing has been decided,” this source said.

How much TCW would fetch is unclear. Founded in 1971, TCW manages a broad range of investment products, including one of the largest mutual-fund complexes in the U.S. It counts some of the nation’s biggest pension and endowment funds as clients. TCW benefited from Bill Gross’s departure from PIMCO in 2014, leading to “extraordinary AUM growth” that year and 2015, Moody’s Investor Services said.

The Los Angeles firm has grown under Carlyle. In 2012, when the buyout shop announced its buy of TCW, the asset manager had about $130 billion in assets under management. That’s jumped 51 percent to $196.9 billion as of June 30.

TCW’s revenue is believed to be between $600 million and $800 million, with EBITDA of about $200 million to $250 million, a fifth source said. The unit would likely sell for about 10x, this person said.

“Asset managers just ain’t worth what they used to be,” this source said.

If TCW does go up for sale, private equity will likely be interested. But the more natural buyers would likely be international or Asian players like Temasek Holdings, sources said.

Carlyle completed its majority buy of TCW in February 2013. Management and employees own a significant chunk, about 40 percent. The deal was valued at around $700 million, Reuters reported.

The PE firm used its $1.1 billion Carlyle Financial Services Partners Fund, a 2008 vintage, and its fifth U.S. buyout fund to acquire TCW. Carlyle Partners V LP, which closed in 2008 with $13.7 billion, made 22 investments. All but seven, including TCW, have been sold, the firm’s website said. That number will go down as KKR agreed in July to buy Nature’s Bounty, which Carlyle acquired in 2010.

Carlyle Global Financial Services I made 16 investments. Seven companies, including TCW, remain in the portfolio.

Executives for Carlyle, TCW and Goldman declined comment. Temasek could not be reached for comment.

Action Item: Call David Lippman, TCW’s president and CEO, at +1 213-244-0000

A relaxing trader views a trading station with four screens of financial data. Photo courtesy of ismagilov/iStock/Getty Images