TCW Discussing Possible Merger or Stock Offer
Trust Co. of the West, one of Los Angeles’ largest money management firms, is weighing the possibility of a merger, public stock offering or other major strategic move, the company has told clients in a letter.
The firm, with about $50 billion in assets, has been rumored since 1994 to be seeking to sell itself or to ally itself with another financial services company, amid the growing wave of consolidation in the money management business.
In a letter to clients, Chairman Robert A. Day said that “over the past few years, and particularly over the last six months, TCW has been approached by a significant number of domestic and international institutions with ideas for a wide variety of strategic alliances.”
Day said the firm has decided that “now is an appropriate time to conduct a more open, formal evaluation” of such proposals. They could result in an acquisition by TCW, a merger with another firm, an alliance or a public stock offering, Day said.
Some analysts said it sounded as if Day, 52, is putting the privately held company up for auction.
TCW, which mainly serves institutional clients such as pension funds but also manages a group of mutual funds for brokerage Dean Witter, grew rapidly in the late 1980s and early 1990s and earned a reputation for making aggressive stock and bond market bets.
But the firm’s heavy investment in Mexican securities hurt it in 1994, when Mexico devalued the peso. And in 1995 several TCW bond managers broke away from Day to form their own firm in what became a bitter split.
This year, however, Day said TCW is having its “best year ever” in terms of investment results. Also, the firm recently raised nearly $1 billion for two special alternative investment funds, one of which will invest in Class A real estate in developing countries.
TCW’s willingness to entertain buyout offers is part of a larger trend in the money management business, which has been undergoing rapid consolidation as companies seek to reach a critical mass--and offer a full range of investments to attract and keep increasingly demanding clients.
