Warburg buys $300m stake in asset manager(2)

The global growth investor has used its $11.2bn Fund XI for the all-equity deal.

Warburg Pincus has acquired a majority stake in Source, an asset manager, from a group of banks.

Financial details of the transaction were undisclosed, but the business was valued at approximately $300 million, or 2 percent of Source’s $15 billion of asset under management, according to a source familiar with the matter. It is understood it was an all-equity deal.

The existing shareholders, including Bank of America Merrill Lynch, Goldman Sachs, JPMorgan, Morgan Stanley and Nomura, will continue as minority shareholders.
Warburg declined to comment beyond the statement.

Source offers equity, fixed income, commodity and alternative market exposure through expertly engineered Exchange Traded Funds (ETFs) and Exchange Traded Commodities (ETCs).

Warburg’s investment will help Source to further develop and launch new products, enhance existing products, expand client relationships and deliver investor solutions. The ETP industry represents a “substantial opportunity for growth and consolidation
coming both from organic expansion and strategic combinations,” Warburg said in the statement.

Lee Kranefuss, currently an executive-in-residence at Warburg Pincus, will join Source as executive chairman where he will work closely with the current management team. Kranefuss was the architect and global chief executive officer of iShares, formerly part of Barclays Global Investors.

It is understood Warburg made the investment from its latest fund, Warburg Pincus Private Equity XI, which closed on $11.2 billion in May 2013, just below its $12 billion target.

The fund backs growth companies in the energy, financial services, healthcare, technology, media and telecommunications and consumer, industrial and services sectors.

Warburg Pincus, which was founded in 1966, has raised 13 private equity funds which have invested more than $45 billion in over 675 companies in more than 35 countries. It has an active portfolio of more than 125 companies and has more than $35 billion in assets under management.