In a move that would vastly expand its U.S. assets under management, the French banking giant Societe Generale Group said Wednesday that it plans to buy a majority stake in TCW Group, an $80 billion-asset Los Angeles asset manager.
The deal, valued at $1.2 billion, is set to be completed in two stages over five years. Since 70% of TCW's assets are managed for institutions, the deal would also give the Paris-based banking company a large U.S. institutional client base for its international asset management capabilities, which stretch from Asia to continental Europe and Britain. Currently just 2% of its $147.42 billion of assets are in the U.S. market. That would jump to 34% after a combination with TCW. Philippe Collas, chairman and chief executive of SG Asset Management, said the transaction would complete a four-pronged global strategy that's been underway for some time. In recent years Societe Generale has bought an asset manager in Japan and built one from scratch in Britain to add to its European presence.
"We wanted to bolster our operations to become a global player," Mr. Collas said in a telephone interview Wednesday from Paris. "We had been missing a platform, and it was the United States."
The French company's strategy in each market is to create or buy an asset management company that is "dedicated to its own market," he said. Societe Generale has had an investment banking presence in the United States since 1998, when it bought the New York investment banking firm Cowen & Co. That acquisition, however, pales in comparison with the TCW deal in terms of size.
TCW, with $68 billion of its assets in U.S. equities and bonds and just $5.2 billion in international assets, would supply local expertise.
"Here's the biggest market in the world," and Societe Generale "didn't have any assets" there, said Robert A. Day, chairman and chief executive of the employee-owned TCW, in a separate interview.
Both Mr. Day and Mr. Collas said the deal is an opportunity for the companies to sell each other's products. "The beauty of the game is to cross-sell between these four bases," Mr. Collas said.
Benoit Vincenzi, an equity analyst at Fox-Pitt, Kelton Inc. in London, said that cross-selling capability would help Societe Generale achieve its goal to manage large-scale institutional assets.
The company's strategy is very global in focus, Mr. Vincenzi said. "They don't really want to take the U.S. market by storm."
Societe Generale's move toward a more global presence in asset management reflects a broader trend in asset gathering.
A lot of traffic has crossed the Atlantic in recent years as U.S. investment firms looked to gain footholds in Europe, where more people are turning to the financial markets as a savings mechanism and changes in regulation are privatizing long-established public pension programs.
Morgan Stanley Dean Witter & Co. recently acquired the British asset management company Quilter Holdings in a bid to get into the burgeoning high-net-worth market there. But the traffic has gone both ways; last year Union Bank of Switzerland bought PaineWebber Group Inc.
William Sonneborn, an executive vice president at TCW, said Societe General was not the company's only foreign suitor.
"We rebuffed a number of offers," Mr. Sonneborn said. "Some of them were from overseas."
In the first stage of the transaction, Societe Generale would acquire a 51% stake in TCW for $880 million by July. In a second stage, to be completed between 2003 and 2006, the French bank would acquire a further 19%. The remaining 30% would remain in employee hands.