European buyout giant EQT AB struck a $7.5 billion cash and stock deal to buy rival private-equity firm Baring Private Equity Asia, a big bet on the growth of Asia’s private markets.
The deal, announced Wednesday, will give EQT almost €18 billion, equivalent to $19.8 billion, in additional assets for a total of more than €90 billion, boosting management fees and investment income from investments, while establishing the Stockholm-based asset manager as a major operator in Asia to complement its bigger operations in Europe and the U.S.
Based in Hong Kong, Baring focuses its private equity and growth investments across several sectors including business and information services, healthcare and technology spread across much of Asia led by China, Hong Kong and India.
EQT is one of Europe’s largest private-equity companies and has been bulking up in recent years to compete with American rivals such as KKR & Co., Apollo Global Management Inc. and Blackstone Inc.
Investor AB, the investment vehicle of Sweden’s prominent Wallenberg family and EQT’s largest shareholder, said Wednesday it supports the Baring deal. EQT’s stock rose more than 9% after the deal was announced.
Investors have plowed money into private equity and other alternative asset classes in recent years, attracted to the promise of better returns than the public equity and debt markets. At the end of 2021, private-equity firms were sitting on a total of $1.81 trillion of unused cash, up from $1.59 trillion at the end of the prior year, according to Preqin, a data provider.
EQT said Asia is a particularly attractive market because assets under management for private capital in the region have been growing at a compounded annual growth rate of 24% since 2015, compared with 14% for Europe and North America combined.
“The scale players like EQT and [Baring] together are taking…an outsized share of the growth and an outsized share of the capital,” Christian Sinding, EQT’s chief executive, said on an analyst call.
Baring, formerly an affiliate of the now defunct Barings Bank, is a stand-alone entity and not part of the Barings Group, which is owned by Massachusetts Mutual Life Insurance Co.
EQT, which invests in private equity, infrastructure, real estate, and growth and venture capital, will gain access to more than 100 potential new investor clients from Baring that don’t already have exposure to an EQT fund. Together they will have more than 1,000 investors across their funds.
EQT went public in 2019, in part because the stock listing would provide it with a currency to fund transactions to expand. Last year, it used its stock to partly fund the $1.87 acquisition of Philadelphia-based Exeter Property Group to expand its real-estate investments in the U.S.
That deal benefited from EQT’s soaring stock price at the time. The buyout firm is again using its stock to fund the majority of the much larger acquisition of Baring. EQT’s stock is trading well below its November highs, declining in recent months with the overall market because of worries over higher interest rates and more recently the economic and geopolitical uncertainty resulting from Russia’s invasion of Ukraine.
Source: Mint