While many people may still be talking about the BK sale, there is another deal that has the potential to be a whopper. Northwestern Mutual Life Insurance is thinking about selling Russell Investments.
Before you laugh, a Russell sale would be a big deal in the asset management space. Anyone who has invested in the stock market knows Russell, which is best known as the index provider behind many mutual funds.
Northwestern Mutual has decided that Russell Investments isn’t a core asset anymore and is seriously considering putting the $140 billion money manager up for sale, according to Investment News. Northwestern Mutual bought Russell in 1998 in a deal that was estimated at $1.2 billion. Earlier this year, Russell sold Pantheon Ventures, its PE firm, to Affiliated Managers Group for $775 million.
I’m hearing that the Russell rumors are true but a sale isn’t imminent and likely won’t come this year. Russell is expected to go on the block next year, possibly in the second half of 2011.
Still, a Russell sale is expected to be hot and the company could fetch $2 billion to $2.5 billion, sources say. PE firms will likely be very interested. Buyout shops that have invested in the asset management space include Hellman & Friedman, TA Associates, KKR, Bain Capital and Carlyle Group.
But why sell?
Tacoma, Wash.-based Russell has suffered some setbacks over the past few years. The fund firm reportedly asked Craig Ueland, its CEO, to resign in 2008 (Andrew Doman replaced him as CEO in January 2009). In March, Russell CFO Frank Ryan and chief of staff Terry Berland left.
In 2009, Russell laid off 20%, or 400 members, of its 2,000-employee workforce. Russell currently employs about 1,800 people. Russell also scuttled its hedge fund-of-funds business and the parent firm had to rescue Russell’s money-markets funds, according to the Seattle Times.
Russell doesn’t have a strategy, one source says. “The new CEO is struggling big time,” the person says.
“They are still dealing with bad morale from the layoffs, the closing down of the fund of funds business, the sale of the PE arm,” another source says. “If they want $2 billion, they will have to prove the operations [have] stabilized.”
All of these problems have not stopped Russell from branching into alternatives. In 2009, Russell decided to launch its own line of exchange traded funds, including ETFs focused on emerging and developed markets. But the ETFs have been stalled in SEC registration (Russell did launch a fund in Australia but has yet to get clearance in the United States).
(UPDATE: Jennifer Tice, a Russell spokeswoman, declined comment beyond a simple denial. “Russell is not for sale,” she said. Meredyth Naramore, a Northwestern Mutual spokesperson, wrote in an email that stories about the Russell sale are “merely rumor and speculation. The company is not for sale.”)