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TCW Decides to Remain Privately Owned

Securities: The giant L.A. money manager says it couldn't find a buyer that could meet its terms.

May 06, 1997|DEBORA VRANA | TIMES STAFF WRITER

After more than seven months of intense negotiations, Trust Co. of the West, which manages more than $50 billion, has decided to remain independent and privately owned, company executives said Monday.

The giant Los Angeles money manager has been rumored since 1994 to be seeking a buyer or considering going public in an attempt to boost its position as the industry consolidates.

But after entering into negotiations with 35 bidders, including foreign banks, other money managers and mutual fund companies, TCW could not find a buyer that would pay the right price and allow its current management and company culture to remain intact, executives said.

"At the end of the day, we did not find anyone who was superior to what we already have, which is a significant employee-owned money manager," said Marc I. Stern, president of TCW Group Inc., the parent company of TCW.

TCW, a highly regarded name in the money management world--Henry Kissinger is a director--is a firm that shuns publicity. In the last few years, it has suffered some high-profile woes, including recent lackluster returns by some of its money managers, especially for the mutual funds it manages for Dean Witter, executives said.

"The company has a great marketing image, it has just had some difficulties in its investment funds as of late," said Jeff Lovell of Putnam, Lovell & Thornton, an investment banking firm in Los Angeles.

In a letter sent Monday to clients, which include many of the nation's largest pension firms, TCW Chairman Robert A. Day, 53, said that although the company could not find the right buyer, it "remains extremely well-positioned to achieve its goal. . . . The company has never been stronger."

Although there is industry speculation that Day might be tiring of the money-management business, Stern said Day--the publicity-shy grandson of the founder of Superior Oil Co.--has no plans to leave and will continue to "be our chairman and our leader."

Some of the rumored bidders for TCW, with more than 550 employees, included PaineWebber Group and a large German bank, industry sources said.

Probably the most intense negotiations were with United Asset Management, the Boston-based holding company that owns 43 money-management firms. Speculation intensified after the company this year bought Beverly Hills-based Pacific Financial Research, which runs the Clipper Fund.

Sources said the negotiations fell apart because TCW executives had overvalued the company and because of conflict over what role Day would have in the company he founded 25 years ago. Jonathan Hubbard, spokesman for UAM, said he could not comment.

Prices for TCW originally were as high as $1 billion but most recently went as low as $500 million, industry sources said. TCW's financial advisors were Goldman, Sachs & Co. and Morgan Stanley & Co.

"Trust Co. was a complicated company to figure out," said James P. Hanbury, an analyst with Schroder Wertheim & Co. who follows UAM. "It was difficult to put a price to it."

TCW hit a rough patch in recent years that started with the Mexican peso devaluation in 1994, which hurt values of some of TCW's top funds. In 1995, TCW lost veteran junk bond specialist Howard Marks and four other top executives who left to start their own firm, Oaktree Capital Management.

However, this year the company raised $1 billion for a new high-yield fund and closed a $300-million Taiwanese fund.

Now that all sale negotiations are concluded, Stern said, TCW will continue with business as usual.

"We're glad it's over," he said. "We're a permanent fixture in Los Angeles."

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