Apax to buy Israel's largest asset manager in $620m deal

Apax will boost its FIG holdings with Psagot Investment House, a $32bn asset manager in which Hellman & Friedman had reportedly bid for a lesser stake at a lower valuation.

Apax Partners is set to control Israel's largest asset management company, Psagot Investment House, in the latest of a series of headline-grabbing events for the firm this month.

Apax released a statement Sunday saying it would pay an undisclosed price to purchase a majority stake in the business from investors led by US hedge fund York Capital Management. In 2006, York Capital carved out Psagot from Israel's Bank Leumi in a roughly $300 million deal.

The sale to Apax is for NIS 2.25 billion ($620 million; €424 million), according to a report in Israel financial newspaper Globes, which said Apax will provide NIS 1.4 billion in equity, with the balance provided equally by Israeli banks Bank Hapoalim and Bank Leumi.

Apax could not immediately be reached for comment.

The private equity firm will reportedly buy a 76 percent stake in Psagot, valuing the business at about NIS 3.2 billion. Media reports last month, which indicated York Capital's intention to sell the business, said the company was 54 percent-owned by York Capital, while fellow US hedge fund Plainfield Asset Management owned a 16 percent stake and US private equity firm Markstone Capital Group owned a 24 percent stake. Markstone – recently in the news following its co-founder's guilty plea in New York's ongoing pay-to-play scandal, and his replacement by the UN's Israeli ambassador – will reportedly retain its stake.

Hellman & Friedman had tabled a bid for a 20 percent stake in Psagot, offering to pay an amount that would have valued the company at about NIS 2.6 billion, according to a report last month in Globes.

Psagot has around $32 billion in assets under management, across business lines including exchange traded, mutual, provident and hedge funds. It does not raise private equity funds.

The business is expected to grow significantly, given Israel's young population, high savings rate and resilient economy, Apax said.

The firm's other financial services portfolio companies include Italian fund manager Azimut and Bankrate, a personal finance company it acquired in a $571 million equity-only deal earlier this year.

Apax, which began investing in Israel in 1994, has captured headlines throughout the month. Last week it said it would write a £975 million equity cheque for Marken, a company specialising in clinical trial logistics, putting a debt package in place before the deal completes in 2010.

Meanwhile, at the beginning of the month it emerged that Apax was close to signing an unusual deal with the China Investment Corporation: In addition to taking a 2.3 percent stake in the management company, CIC has offered to invest up to €800 million to acquire undrawn commitments from existing LPs in Apax’s €11.2 billion 2007 vintage fund. While other large private equity firms have given their investors the chance to reduce commitments in light of LPs’ liquidity or over-commitment issues, this is the first instance in which the manager does not plan to reduce its fund size, but has found a new LP to backstop the commitments.

Apax is investing from its seventh fund, which was around 40 percent deployed at the beginning of December.