China’s GCS eyes €80bn asset manager

GCS Capital has entered exclusive talks for Dexia Asset Management, which had reportedly drawn interest from firms including Advent, Bain, CVC, Permira and Warburg Pincus.

The sale of Dexia Asset Management has entered its final phase. Chinese private equity firm GCS Capital confirmed in a statement it has started exclusive negotiations with Franco-Belgium bank Dexia to acquire DAM, in what would be the latest spin-off of an asset management arm by a troubled lender.

The transaction would come as Dexia wrestles to pay back €5.5 billion in bail-out money from the French and Belgium governments. Both parties declined to provide further details, but the deal could be worth up to €500 million, according to a Financial Times report. Dexia Asset Management has €80 billion under management, and employs 550 people. GCS plans to retain existing staff and offices.

The eurozone crisis has led to drastic revision in the value of financial services businesses across the continent, but has failed to generate many sales. Potential bidders have continued to fret over the risk associated with eurozone exposure, and sellers have been reluctant to let go entire divisions at fire sale prices.

But a conclusion to the Dexia deal could show that expectations have started to adjust on both sides. It may also indicate that the take-over of non-core banking assets by private equity firms, which has long been anticipated but has so far made little progress, is finally gaining momentum.

A number of large buy-out firms had advanced offers for Dexia Asset Management earlier this year, Reuters reported in May. Advent International, Bain, CVCPermira and Warburg Pincus were thought to be among the initial bidders. A spokesperson for Permira confirmed that the firm had been involved in the first stages of the auction process, whilst Bain, CVC and Warburg Pincus declined to comment. Advent International couldn’t be reached for comment.

“Dexia Asset Management presents a rare opportunity to acquire a well-capitalised, standalone asset management business with the potential to transition into a global franchise,” Huan Guocang, CEO of GCS Capital, said in a statement.

GCS Capital was founded by two former senior investment bankers from HSBC and is based in Hong Kong, with additional offices in Beijing in London. Its ambition is to offer high quality European and Australian fund products to Asian and Middle Eastern investors, as well as new products from Asia and the Middle East to all geographies.

The deal is still subject to an agreement between both parties and regulatory approval, with an expected completion date in 2013.