Assured Guaranty Ltd. has agreed to take over BlueMountain Capital Management, the $19.3 billion money manager that has come under pressure in recent months.
Assured Guaranty will pay $160 million to buy out majority shareholder Affiliated Managers Group Inc. and the founders, according to a statement Wednesday, confirming a report by Bloomberg News. The insurer will also invest an additional $590 million in the firm and its funds.
The sale is the latest chapter for BlueMountain, a once high-flying hedge fund firm founded by Andrew Feldstein and Stephen Siderow. In May, more than 15 years after the firm was founded, AMG wrote down the value of its stake by $415 million after determining that BlueMountain’s growth prospects had dimmed.
Under the terms of the deal, Feldstein will become the chief investment officer and head of asset management at Assured, while Siderow will keep his BlueMountain role as co-president. Feldstein will receive $22.5 million of Assured Guaranty common stock as part of the deal.
Assured Guaranty, which offers insurance to debt investors as well as other insurers, will get a new platform for alternative credit and a strong collateralized loan obligations business.
“We have been searching for the right asset management platform for over three years, and we found it in BlueMountain, a seasoned asset management firm with a compatible credit culture, complementary market knowledge and the scale to make a material contribution to Assured Guaranty’s profitability,” Dominic Frederico, Assured Guaranty’s chief executive officer, said in the statement.
The sale also comes after BlueMountain shuttered its $1 billion computer-driven portfolio and its long-short equities book this year. The firm has laid off about 75 people since December and other employees quit, according to people familiar with the matter who asked to not be identified discussing private information. BlueMountain now employs about 140 people, compared with 252 from a March filing.
BlueMountain has no further restructuring plans, one of the people said. The transaction is expected to close in the fourth quarter. No decision has yet been made on whether BlueMountain will change its name.
Assured Guaranty will invest $500 million in BlueMountain’s funds, CLOs and separately managed funds over three years and an additional $90 million toward working capital within a year of the deal closing.
BlueMountain and AMG had been working with advisers on a sale process for AMG’s stake. AMG, an investment manager that buys stakes in other money managers, initially invested in BlueMountain in 2007. AMG’s stake in the firm was 54%, while Feldstein and his wife own 30%, one of the people said. Multiple partners own the rest. In May, AMG reported a $415 million writedown on the value of its holding in the hedge fund firm.
BlueMountain was advised by Barclays Plc and Purrington Moody Weil LLP, while Assured Guaranty was advised by Goldman Sachs Group Inc., Greensledge Capital Markets LLC and Mayer Brown LLP.
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