Franklin Resources, Inc. NYSE: BEN, a global investment management organization operating as Franklin Templeton, and The Bank of New York Mellon Corporation NYSE: BK “BNY Mellon” today announced that Franklin Templeton has entered into a definitive agreement to acquire BNY Alcentra Group Holdings, Inc. together with its subsidiaries, “Alcentra” from BNY Mellon. One of the largest European credit and private debt managers, Alcentra has $38 billion in assets under management “AUM” with global expertise in senior secured loans, high yield bonds, private credit, structured credit, special situations, and multi-strategy credit strategies.
Through this acquisition, Franklin Templeton’s U.S. alternative credit specialist investment manager, Benefit Street Partners “BSP”, will expand its alternative credit capabilities and presence in Europe, doubling its assets under management to $77 billion globally. The transaction will also continue to strengthen the breadth and scale of Franklin Templeton’s alternative asset strategies and brings firmwide alternative assets under management to $257 billion after the transaction closes.
“We’re delighted to announce the acquisition of Alcentra and look forward to welcoming its talented team to our firm,” said Jenny Johnson, President, and CEO of Franklin Templeton. “We have been deliberate in building our alternative asset management capabilities over recent years and the acquisition of Alcentra is an important aspect of our alternative asset strategy – the expansion into alternative European credit. Alternative investments represent a significant diversification tool for our clients and an area of increasing importance for both individual and institutional investors. This acquisition expands our long-standing relationship with BNY Mellon, and we are pleased that the structure of the transaction achieves objectives for both Franklin Templeton and BNY Mellon in the context of current market conditions.”
The transaction is expected to be completed early in the first calendar quarter of 2023, subject to customary closing conditions, including certain regulatory approvals. The acquisition will be funded from Franklin Templeton’s existing balance sheet resources and is expected to be immediately accretive to adjusted earnings per share. Franklin Templeton will pay $350 million in cash at close and up to a further $350 million in contingent consideration dependent on the achievement of certain performance thresholds over the next four years. In addition, Franklin Templeton has committed to purchase all seed capital investments from BNY Mellon related to Alcentra which, as of March 31, 2022, were valued at approximately $305 million. The seed capital investments will be valued at the time of close to determine the final seed capital purchase amount.
Upon closing, BNY Mellon Investment Management will continue to offer Alcentra’s capabilities in BNY Mellon’s sub-advised funds and in select regions via its global distribution platform, and BNY Mellon will provide Alcentra with ongoing asset servicing support. At close, BNY Mellon expects the transaction to increase BNY Mellon’s Common Equity Tier 1 capital by approximately $0.5 billion.
Founded in 2002, Alcentra employs a disciplined, value-oriented approach to evaluating individual investments and constructing portfolios across its investment strategies on behalf of more than 500 institutional investors. Alcentra’s dedicated and highly experienced team of approximately 180 professionals is based in its London headquarters, as well as in New York and Boston.
Tom Gahan, CEO of BSP and Head of Franklin Templeton Alternatives, added, “We believe the addition of Alcentra will elevate Franklin Templeton and BSP to a leading position in global alternative credit. Alcentra is highly complementary to our existing U.S. capabilities, with no overlap in Europe. This partnership will unlock new opportunities to offer broader global credit solutions to our clients who are increasingly allocating capital to this growing asset class. We look forward to working closely with the Alcentra team.”
Hanneke Smits, CEO of BNY Mellon Investment Management, said, “We’re extremely pleased to be strengthening the partnership with Franklin Templeton and continuing to offer Alcentra’s credit capabilities as part of the broad range of alternative solutions we already offer today. We look forward to ongoing collaboration with the combined institution through distribution and further building on BNY Mellon’s existing asset servicing arrangement.”
Jon DeSimone, CEO of Alcentra, added, “Today’s announcement is the beginning of an exciting new chapter for Alcentra as a dynamic credit partner for our investors. BNY Mellon has provided strong support over the years and has contributed significantly to our growth with assets under management doubling since 2014. The global combination of Franklin Templeton and BSP’s highly complementary capabilities will enable us to collectively provide clients with solutions across the credit spectrum.”
Morgan Stanley & Co. LLC and UBS Investment Bank served as financial advisors to Franklin Templeton and Willkie Farr & Gallagher LLP served as legal counsel. Ardea Partners served as financial advisor to BNY Mellon and Sullivan & Cromwell LLP served as legal counsel.