Blackstone Talked With Ken Griffin’s Citadel About Buying Stake

Discussion in 'Wall St. News' started by dealmaker, Oct 13, 2019.

  1. dealmaker

    dealmaker

    Blackstone Talked With Ken Griffin’s Citadel About Buying Stake
    Flagship hedge-fund operation could be worth up to $7 billion
    [​IMG]
    A deal would add to Ken Griffin’s estimated $12.7 billion personal fortune. Photo: Patrick T. Fallon/Bloomberg News
    By Rachael Levy and Liz Hoffman
    Oct. 12, 2019 9:00 am ET

    Blackstone Group Inc. BX 1.29% has held talks to buy a stake in Ken Griffin’s Citadel LLC, a deal that would unite two of the biggest names in investing.

    Blackstone has discussed an investment in both Citadel’s flagship hedge-fund firm and its lower-profile but fast-growing securities-trading operation, said people familiar with the matter. These people described the talks as occasionally contentious and not certain to result in a deal.

    The valuation being discussed couldn’t be determined, but Citadel executives estimate the hedge fund, with $32 billion in assets under management, is alone worth between $5 billion and $7 billion, according to a person familiar with the matter.

    Bringing in Blackstone, which manages more than $500 billion in assets, could give Citadel more capital as its dealer arm, Citadel Securities, continues to expand.

    “Citadel is a terrific firm, but we are not in discussions with them at this time,” a Blackstone spokeswoman said.

    Launched in 2002, that business has become one of the biggest players in executing stock and option trades. It is elbowing into fixed-income products, and executives have said it aims eventually to join the small club of banks and brokers that can buy Treasurys directly from the federal government for resale to clients.

    “Given the value that we have delivered for our partners and stakeholders over nearly 30 years, a number of investors have expressed interest in our management company,” Citadel’s spokesman Zia Ahmed said.

    Blackstone has an $81 billion unit that invests in and buys pieces of other investment firms. In August, it bought between 10% and 15% of private-equity firm BC Partners.

    Citadel, though, would be a crown jewel. After a near-death experience in 2008, Citadel has steadily outpaced its competitors. Its main fund is up about 14% this year, said people familiar with the matter.

    “I don’t manufacture cars,” Mr. Griffin told The Wall Street Journal in 2015, “but we do manufacture money.”

    At a rich-enough price, a deal for Citadel would be a validation of Mr. Griffin’s run atop one of the world’s most successful hedge funds. It would also add to his estimated $12.7 billion personal fortune, part of which he has funneled into the largest gift in Harvard University’s history and the most expensive apartment in New York City.

    Last month, Citadel sold $500 million of bonds to fund a payout to Mr. Griffin, among other things, the Journal previously reported.

    Mr. Griffin weighed taking Citadel public in 2015, the Journal reported at the time, but it never listed. Since then, publicly traded alternative-asset managers have had a rough go. Stock pickers have been outpaced by a broader rise in the market, and clients have complained about paying high fees for middling returns.

    Fortress Investment Group and Oaktree Capital Management sold out to bigger, more-balanced money managers. Och-Ziff, once worth $11 billion, recently renamed itself Sculptor Capital Management Inc. and trades at about $840 million today.

    Write to Rachael Levy at rachael.levy@wsj.com and Liz Hoffman at liz.hoffman@wsj.com

    https://www.wsj.com/articles/blacks...shareToken=stb4814e787eb545e4bffbce366ea06f5e
     
  2. Nighthawk

    Nighthawk