Hong Kong-based Primus Financial, the financial services-focused private equity firm established last year, has made its second acquisition with the purchase of New York-headquartered brokerage and advisory firm Chapdelaine & Co.
No financial details of the acquisition, which was made through Primus vehicle PFH Partnership Holdings, have been disclosed. However, a statement released by Chapdelaine & Co stated that it would have a book value of around $100 million once the deal completes later this year.
Founded in 1966, Chapdelaine is a brokerage focused on fixed income markets. With three offices in the US and 200 employees, its products include municipal bonds, corporate bonds, agency bonds and US Treasuries. Post-acquisition, there are plans to grow the company both in terms of depth and breadth of product offering, and geography, with Europe and Asia targeted as areas ripe for expansion, Robert Morse, co-CEO and co-chairman of the firm, told PEI Asia in an interview.
With the purchase of Chapdelaine, Primus has laid down foundations in the brokerage and advisory industry, one of the four financial services sectors the firm is targeting in its investment remit.
“We want to build on four pillars: insurance; brokerage and advisory; banking; and asset management,” Morse said. “[Chapdelaine] is the ideal platform from which to build that brokerage business.”
Morse said Primus had chosen to target a US company in this sector because the market there was the “biggest, deepest and most profitable – and also frankly the most troubled”.
He explained that of the roughly $200 billion fixed income market, about 18 percent of market share had been left up for grabs by the consolidation and fallout seen amongst established players during the economic downturn. “If we can get 2 percent of the $200 billion, that’s $4 billion,” he added.
Primus made waves in Asia last October when it beat off private equity competitors including The Carlyle Group, Bain Capital and MBK Partners to clinch an agreement to buy Taiwan’s Nan Shan Life Insurance from US giant AIG. Primus partnered with Hong Kong-listed investment company China Strategic Holdings on the $2.15 offer, which would leave it holding a 20 percent stake in the company. However, the deal has since run into troubled water as the Taiwanese government suspects China Strategic has funding from mainland China. A resolution is expected in June.
Nan Shan was Primus’ first deal and, if approved, will set the ball rolling on another of its four “pillars” of business, insurance. Morse said the firm had deliberately targeted the Asian insurance sector, since the potential for growth in the region was so huge. “We aim to develop Nan Shan into a leading Taiwan-based, pan-Asian financial services company,” he said in a statement at the time.
While the firm has yet to make any concrete moves in the banking sector, it has made a start on its fourth area of interest, asset management, taking a majority partnership in the Real Estate Opportunity Capital Fund (ROC Fund). The fund, managed by Utah, US-based Pacific Finance Holdings, focuses on distressed opportunities in the US market.
As for looking into further asset management opportunities, in private equity for example, Morse said there were no definite plans as yet. However, he added: “We are still interested in having a broader asset management platform. We are doing extensive analysis of the market [and] actively working in the area.”
Primus was established in April last year by Morse, co-CEO Wing-Fai Ng, and co-chairman Huan Guocang, with an initial permanent capital of $1 billion from an undisclosed high-net-worth Asian family. Morse told PEI Asia the firm had raised more money since then, also from within Asia, although he declined to be more specific.
Morse was CEO of Citigroup’s Asia Institutional Clients Group between 2004 and 2008. Before that he was head of global investment banking for Citi, a New York-based role. Prior to that, he worked for Salomon Brothers, which he joined in 1985. While there, he co-founded $400 million private equity fund SSB Capital Partners in 2000.
Ng and Guocang previously managed private equity firm Primus Pacific Partners, which they founded in 2005 along with David Olsen, the former chief executive of financial services firm Guggenheim Merchant Banking. The firm closed its first fund Primus Pacific Partners on $400 million in 2005. The fund targeted Asian financial services companies and is fully invested. Its investments included Chinese insurance company New China Life Insurance and Malaysian bank EON Capital Berhad.
At the time of the launch of Primus Financial, Huan and Ng described it as a “successor organistion” to Primus Pacific.