With the acquisition of Alcentra, Franklin Templeton aims to expand the capabilities and presence of its alternative credit specialist unit Benefit Street Partners (BSP) in Europe

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Franklin Templeton Investments headquarters in California. (Credit: Coolcaesar/Wikipedia)

US-based investment management firm Franklin Templeton has agreed to acquire BNY Alcentra Group from The Bank of New York Mellon Corporation (BNY Mellon).

Under the agreement, Franklin Templeton will make an upfront payment of $350m in cash at closing.

It will pay up to an additional $350m in contingent consideration, subject to the achievement of certain performance milestones over the next four years.

Furthermore, Franklin Templeton has agreed to buy all the seed capital investments related to Alcentra from BNY Mellon, which were valued at around $305m.

The transaction is expected to close early in the first calendar quarter of 2023, subject to customary closing conditions, including certain regulatory approvals.

Upon closing of the deal, BNY Mellon Investment Management will continue to offer Alcentra’s sub-advised funds in select regions through its global distribution platform.

Franklin Templeton intends to fund the acquisition from its existing resources and is expected to be immediately accretive to adjusted earnings per share.

Franklin Templeton president and CEO Jenny Johnson said: “We’re delighted to announce the acquisition of Alcentra and look forward to welcoming its talented team to our firm.

“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.”

Established in 2002, Alcentra is one of the large credit and private debt managers in Europe, with $38bn in assets under management (AUM).

The company has expertise in senior secured loans, high yield bonds, private credit, structured credit, special situations and multi-strategy credit strategies.

With the acquisition of Alcentra, Franklin Templeton aims to expand the capabilities and presence of its alternative credit specialist unit Benefit Street Partners (BSP) in Europe.

The transaction will double the size of BSP’s assets under management to $77bn worldwide.

Also, the deal will help strengthen its alternative asset strategies, and bring its alternative assets under management to $257bn upon its closing, said Franklin Templeton.

Franklin Templeton Alternatives head Tom Gahan said: “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.”

Morgan Stanley & Co. and UBS Investment Bank served as financial advisors, and Willkie Farr & Gallagher served as legal counsel to Franklin Templeton on the transaction.

Also, Ardea Partners served as financial advisor and Sullivan & Cromwell as legal counsel to BNY Mellon.