While US banks Citi and Wells Fargo try to iron out a compromise to buy Wachovia, an uncertain fate hangs over middle market-focused Wachovia Capital Partners, which is currently investing a $1.8 billion fund.
Wells Fargo has offered $15 billion to buy the whole company, while Citi has offered $2.1 billion to acquire Wachovia’s banking operations. The two companies were in talks Wednesday to split up Wachovia between them, a move that is being pushed by federal regulators, according to a Bloomberg report.
Meanwhile, 20-year-old Wachovia Capital Partners is hanging in limbo, a fate shared by the private equity units of Lehman Brothers, Merrill Lynch and AIG as they cope with corporate takeovers and, in AIG's case, a government bailout.
Wachovia Capital has invested more than $3.5 billion in 200-plus mid-market companies since it was established in 1988. Led by Scott Perper, Frederick Eubank and Watts Hamrick, the firm is currently investing from its $1.8 billion WCP II fund.
The firm focuses on industries like financial services, healthcare, energy, media communications and industrial. Its portfolio comprises more than $1 billion in invested capital and the firm expects to make annual investments of $250 million to $350 million, according to its website.
Wachovia Capital’s recent investments include HostMySite, an Internet hosting provider, which the firm acquired in June for an undisclosed amount, and Georgia-based cable and broadband service provider BroadBand Services, which it invested in in February 2007.
Wachovia did not return several calls for comment, Wells Fargo declined to comment and Citi could not be reached for comment.
Private equity firms Bain Capital and Hellman & Friedman acquired Lehman Brothers’ asset-management unit Neuberger Berman last month. The transaction did not include Lehman’s principal private equity businesses but did include fixed income, private equity fund of funds, secondaries and some of Lehman’s co-investments and several start-up private equity businesses, including the firm’s debut infrastructure fund. Its core private equity units are reportedly looking to spin out independently, as did Bear Stearns Merchant Banking following Bear Stearns' sale to JPMorgan.
Bank of America’s $50 billion purchase of Merrill Lynch will result in the creation of a private equity and global operations division that will be headed up by Brian Moynihan, the bank’s president of global corporate and investment banking. It is unclear if the new private equity division will include Merrill Lynch’s global private equity portfolio, thought to be worth between $5 billion and $6 billion.
AIG said earlier this month it will sell all its businesses, including the $758 billion AIG Investments arm, save for its core insurance businesses to pay back an $85 billion loan from the US government.