US - Axa SA's private-equity unit agreed to buy $1.9bn of investments in private-equity funds from Bank of America Corp. as the buyout industry emerges from the worst recession in 70 years.
Axa Private Equity is buying stakes in 60 mostly U.S.-based private-equity funds at a discount, Vincent Gombault, head of Axa Private Equity's fund of funds business, said during a call with reporters today. Similar assets are trading at up to a 10% discount to net asset value, Gombault said, declining to say whether it applies to this transaction.
US banks are being pressed to reduce their investments in buyout funds after President Barack Obama proposed to bar them from owning hedge funds and private-equity assets as part of new rules to reduce risk. Meanwhile, buyout firms are writing up the value of their assets to reflect a recovery in equity markets since their March 2009 low.
"This transaction enables Bank of America to reduce its exposure to private equity and manage its capital allocation on the long term in terms of risk," Jim Forbes, global principal investments executive at Bank of America, said in a statement.
The stakes Axa Private Equity is buying are in funds that started investing in 2006, 2007 and 2008, Gombault said.
Axa's leveraged-buyout unit is also in talks to buy the private-equity business of Natixis SA, the investment-banking subsidiary of France's second-biggest bank by branches, in a deal valued at about €534m (US$713m), Natixis said. It bought US$2.6bn worth of private-equity assets this month, Gombault said.
In February, Apax Partners LLP investors sold stakes in the private-equity fund worth about €650m to China Investment Corp., a person familiar with the transaction said then. CIC bought the assets at par.
Axa Private Equity can use up to $1bn of cash to make similar acquisitions, Gombault said.
"Market conditions are good to pursue the kind of deal we're announcing today," he said.
Earnings at companies bought by buyout firms in 2006 and 2007, at the peak of the private-equity boom, are improving and they are paying down debt, Gombault said.
"This theory of the wall of debt that needs refinancing is fading away," he said. "Debt ratios are improving."
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