12/02/2009

Natixis Exploring Private Equity Spinoff

Natixis is looking into the possibility of spinning off some 18 private equity units that together manage an estimated €1.5 billion ($2.25 billion) for the bank.

The divisions each focus on a different strategy or geographical region. The Paris bank's goal is to find new sponsors, thus allowing it to halt any further support amid a cash shortage. It may also seek to sell some of the groups' existing investments, consisting mainly of direct buyout or growth capital deals.

As part of the effort, Natixis has hired Paris mergers-and-acquisitions advisor Oddo & Cie to review possible spinoff strategies. The firm, where Natixis chief executive Laurent Mignon worked until taking his current post in April, is expected to issue a formal recommendation in the next month or two. The plan could go into effect soon afterward.

A number of options appear to be on the table. The review covers all private equity groups for which Natixis is a sponsor - teams that might also run outside money both within and apart from its Natixis Private Equity division. How they would be offered is undecided, however.

Also yet to be spelled out is whether a secondary-market sale would be involved. Some market players believe Natixis is eyeing a big reduction to its private equity exposure, and hopes to unload all but about one-third of the groups' holdings. But others point to obstacles standing in the way of such a deal.

For starters, there have been some indications that Natixis would use strong performance figures posted by the units as justification to demand nothing less than net asset value for their existing investments. Given that most secondary-market trades are taking place at substantial discounts, the upshot is that the BPCE subsidiary could wind up holding its current positions while seeking suitors to assume future funding. But it's unlikely that new parents would sign on unless some form of discounted secondary-market portfolio is added as a sweetener, sources said.

The groups Natixis is eyeing for possible spinoffs are spread across the world, including two in China, one in India and one in Brazil. The main operations in play include N.I. Partners, iXen and Initiative & Finance.