Spanish lender Santander has agreed to sell 50% stake in its asset management arm to US private equity firms Warburg Pincus and General Atlantic.

Santander will make a EUR700 million (US$914 million) net profit from the deal, which valued Santander Asset Management at EUR2.05 billion, Santander said in a statement.

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For Warburg Pincus and General Atlantic, the addition of Santander Asset Management to their portfolios further increases their investments in financial services.

 

Lead up period

Speculations have been rife over the last couple of months regarding Santander’s possible sale of its asset management arm. The lender was said to be negotiating terms of the deal earlier in May. Santander also cut down 724 jobs and pulled out of investment advice.

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On 28 May, Santander put an end to the speculations confirmed recent speculations by issuing a statement to the London Stock Exchange saying, "In response to recent press speculation, Banco Santander reports that it is exploring the possibility of incorporating investors to its asset management division although no agreement has been reached yet for any such investment".

 

View ahead

For Santander, the sale of its asset management arm provides financial backing to expand the business outside of Europe and Latin America, where most of its EUR152 billion of assets currently under management are located.

Santander said it "hoped to double these assets in the next five years" and play an active part in consolidation of the sector to "compete with the world’s biggest asset managers".

 

Buyers involved

Warburg Pincus in October 2011 led a US$1 billion investment in Banco Santander’s Santander Consumer USA (SCUSA), a U.S. automotive finance lending business. In April 2010, Warburg purchased shares of Primerica, a distributor of financial products to middle-income households in North America, from Citigroup as part of Primerica’s spin-off via an initial public offering.

General Atlantic Partners has a history of investing in financial services companies, such as First Republic Bank, a San Francisco-based private bank and wealth management firm, and online brokerage E*Trade Financial.