First Eagle Investment Management has agreed to buy middle-market lending firm NewStar Financial Inc. (Nasdaq:NEWS). The target won Mergers & Acquisitions’ Lender of the Year award in 2015.
NewStar is a commercial finance company and investment manager to the middle-market sector with approximately $7.3 billion in assets under management. The Boston-based firm is comprised of two divisions – its direct lending and asset management businesses. Concurrent with First Eagle’s acquisition, NewStar is selling a portfolio of investment assets including nearly $2.4 billion of middle-market loans and other credit investments to a newly formed GSO Capital Partners fund.
First Eagle is expected to pay between $12.32 and $12.44 per share; however the deal is contingent upon GSO Capital completing its purchase of NewStar’s investment assets. First Eagle is an privately-owned investment firm with roots dating back to 1864. The New York-based firm has approximately $116 billion in assets under management. First Eagle’s investment spectrum includes equity, fixed income and multi-asset strategies.
“Credit strategies focused on middle market lending will continue to provide a compelling risk-adjusted solution for investors looking for meaningful and sustainable income, even if interest rates normalize in the future,” states First Eagle CEO Mehdi Mahmud.
In 2015, NewStar provided leverage on deals for a number of private equity firms, including: Genstar Capital, The Pritzker Group, Irving Place Capital, Sentinel Capital and New Mountain Capital. NewStar’s track record of “lending prudently to middle market companies and managing broadly syndicated loan portfolios” aligns well with First Eagle’s core investment tenets, according to Mahmud. In September 2015, NewStar acquired Feingold O'Keeffe Capital LLC for an undisclosed amount.
Some financial services professionals predict M&A in the sector to pick up. Recent acquisitions include: B. Riley Financial Inc.’s (Nasdaq: RILY) deal to acquire investment banking and brokerage firm FBR & Co. (Nasdaq: FBRC) for $160 million; Genstar Capital-backed Mercer Advisors Inc. acquiring investment advisory firm; Duckworth Wealth Advisors Inc.; and Lucia Capital Group’s investment in West Coast Asset Management.