AXA spin-out likely to keep management in control

AXA has hired Credit Suisse to explore a sale of its private equity arm, which could lead to a management buyout allowing the division's CEO, Dominique Senequier, to retain control.

The most likely buyer for French insurance giant AXA’s $28 billion private equity arm, AXA Private Equity, would be a sovereign wealth fund or large private equity firm that would allow the management team to retain control, according to sources in the secondaries market familiar with AXA PE.

A source confirmed last week that AXA had hired Credit Suisse to explore a sale of AXA PE, though a sale was not guaranteed. AXA PE declined to comment. The potential sale was first reported by Sky News.

The head of AXA PE, Dominique Senequier, is a very “independent minded” executive, who, even though having spent her time at AXA working under a boss, has had flexibility to run the firm her way, one source said. Senequier has run AXA PE since 1996.

“The team would rather take a solution where they’d really control the destiny and have an independent brand,” the secondaries source said. “What is the deal where AXA gets paid, the management team gets paid while being independent? Dominique has always run the business quite independently.”

The source added: “She’s always been proud of being part of AXA, but she doesn’t need a babysitter.”

The team would rather take a solution where they'd really control the destiny and have an independent brand.

Secondaries source

Likely candidates to buy the business are sovereign wealth funds or large private equity shops that have expanded into other strategies. The obvious recent example is The Carlyle Group, which earlier this year acquired the €32 billion Dutch fund of funds giant Alpinvest from its Dutch pension fund owners APG and PGGM.

Carlyle partnered with Alpinvest’s management in the acquisition, and one source said the management team has been happy so far under Carlyle’s management. “I don’t think they’re complaining too much about the ownership of Carlyle,” the source said.

Carlyle showed the industry how to avoid the potential conflicts of a GP owning an LP. The firm set up barriers so that Alpinvest retained all LP information and retained complete discretion over investment decisions. A similar structure would likely be necessary if a private equity firm acquired AXA PE.

However, Carlyle acquired Alpinvest, along with numerous other firms, to build revenue streams to make itself more attractive to public investors ahead of an initial public offering, which it filed earlier this month. It’s not clear if the firm will be as active as it had prior to the IPO filing.

Also, sovereign wealth funds, especially those in Asia and the Middle East, have had an appetite for investments in financial firms, another secondaries source said. “It’s not [il]logical for them to say, ‘we’ll use AXA PE as our investment arm across the world’,” the source said. For example, earlier this year the Kuwait Investment Authority and the Government of Singapore Investment Corporation invested roughly $500 million in TPG for a 5 percent stake in the firm.

AXA PE has one of the largest LP portfolios in the industry, with 550 funds in the fund of funds portfolio, according to the firm’s 2010 annual report. The numbers do not include several large secondary deals the firm completed over the last two years, including the recent acquisition by the firm and LGT Capital Partners of a €620 million portfolio from German HSH Nordbank.