Golub Capital looks to sell minority stake: source

  • Golub manages more than $25 bln in capital
  • Competes with Antares and Ares in mid-market lending
  • Dyal owns stakes in Cerberus, H.I.G., Silver Lake, Vista

Golub Capital, one of the biggest middle-market lenders, is considering selling a minority stake to an outside investor, a source familiar with the process said.

Golub is looking at divesting 15 percent, the person said. The stake would be passive, the source said. Golub has hired a financial adviser, believed to be JP Morgan, the source said.

The lender is speaking to a select group of “the usual suspects,” the person said.

Founded in 1994, Golub provides financing for middle-market companies and their PE sponsors. It currently has more than $25 billion in capital under management.

Golub competes with Antares Capital, which manages more than $20 billion of capital, and Ares Capital, which has $12.7 billion. (Ares Credit, which includes Ares Capital, had $77.3 billion in capital under management as of March 31, 2018.)

Golub, of New York and Chicago, is owned by its employees. Lawrence Golub is the CEO while his brother, David, is president. None of the owners is selling any of their holdings, the source said.

Instead, Golub will issue new equity and all the capital the sale generates is expected to go back into the business, the person said.

A sale will not change how Golub is run since it is considered a financing decision, the person said. A transaction is expected to be completed during the summer, the source said.

If completed, Golub would be the latest firm to take part in minority-stake sales. The trend has seen several buyout shops opting to sell slivers of themselves to outside investors. Last month, Vector Capital sold a minority, less than 10 percent, to Dyal Capital. Cerberus Capital Management in December also sold a chunk of itself to Dyal.

Dyal, a unit of Neuberger Berman, is the leader in gobbling up GP minority stakes. In addition to Vector and Cerberus, Dyal has invested in Sound Point Capital, KPS Capital, H.I.G. Capital, Silver Lake and Vista Equity.

Goldman Sachs Asset Management ranks a distant second in minority stake transactions. Petershill Private Equity has invested in Littlejohn & Co, ArcLight Capital Partners and Accell-KKR. Then there’s Blackstone Group, which last year bought a slice of Leonard Green & Partners.

Also looking to buy minority GP stakes are AlpInvest (Carlyle Group) and Anteil Capital Partners (Credit Suisse). Affiliated Managers Group also owns hedge funds and private equity firms, including Pantheon.

PE firms sell stakes for a variety of reasons.

Generational issues are the most obvious. Younger executives often lack the funds to cash out senior partners. Capital gained from a minority sale can fund an exit. Minority sales can also help put permanent capital on a firm’s balance sheet or boost a GP commitment.

Growth, however, is the reason behind Golub’s sale, the source said. The firm is looking to expand. Golub is expected to use the capital to invest in more products and take part in bigger transactions, the source said. The firm also wants to grow its investment in risk retention, particular in regards to CLOs, the source said.

If it completes a transaction, Golub won’t be the first lender to sell a stake. Ares Management, parent of Ares Capital, sold a 6.25 percent stake to Alleghany Corp in 2013 for $250 million. In 2007, Ares also sold 15 percent to 20 percent of the firm to Abu Dhabi Investment Authority for $375 million. Abu Dhabi has sold its stake in Ares, a spokesman said.

JP Morgan declined comment. Executives for Golub could not be reached for comment.

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