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Evercore To Receive $120M From Mizuho
Japanese bank's capital infusion into Evercore comes eight months after Merrill investment.
August 21, 2008
Evercore Partners, a New York investment bank and private equity firm, said Thursday that it plans to raise $120 million in new funding through a deal with Japan’s Mizuho Corporate Bank.
Terms call for Mizuho to purchase 5.2% senior unsecured notes, maturing in 2020, from the publicly-traded firm and warrants for the purchase of 5.4 million common shares at a strike price of $22 each. As part of the deal, Mizuho CB and Mizuho Securities Co. have agreed to invest up to $150 million in Evercore’s investment funds, serving as its new limited partners.
"We have enjoyed a strong alliance with Mizuho, and this broader relationship enables both our advisory and investment management businesses to partner with a truly leading Japanese institution,” said Roger Altman, chairman and chief executive of Evercore, in a statement, noting the new deal will help further globalize the firm.
In addition to its New York office, the firm also has locations in San Francisco, London, Mexico City and Monterrey, Mexico.
Officials from Evercore did not immediately return calls seeking comment.
Evercore, a $157.9 million market-capitalized financial services firm, and Mizuho aren’t strangers, having entered into a strategic alliance in 2006 to pursue M&A opportunities whereby both groups sought to benefit from cross-border advisory assignments between US and Japanese companies. In Mizuho’s case it will be the Japanese bank’s latest capital infusion in a US banking firm, eight months after it invested $1.2 billion in Merrill Lynch.
The deal with Mizuho comes shortly after Evercore teamed up with São Paulo-based investment banking boutique G5 Advisors to manage cross-border M&A and related transactions between Brazilian companies and strategic businesses outside of South America. Additionally, the investment bank fortified its asset management franchise through the purchase of a 50% interest in London’s Pan-Asset Capital Management, a firm launched earlier this year to capitalize on exchange-traded fund investing.
Evercore plans to use proceeds from the Mizuho investment to fund the build-out of the firm’s investment management and strategic advisory businesses.
Investors responded positively to the new capital raise by Evercore, driving its share price up 5.3% to $13.53 a share, compared with a previous-day close of $12.84 each. Today’s trading price has brought its shares back to almost half their yearly high of $27.89 per share.
Mizuho, meanwhile, will assign an executive to join Evercore's board.
Established in 1996 by Altman, a former US Treasury deputy secretary and an ex-M&A banker for The Blackstone Group, as well as Austin Beutner and David Offensend (both of whom are no longer with the firm), Evercore is well-known for carving out a profitable niche as a boutique known for brokering some $600 billion in M&A transactions, ranging from multi-billion dollar buyouts to middle-market leveraged buyout deals. This year its private equity transactions include Menlo Park, Calif.-based Silver Lake’s 9.9% stake sale to the California Public Employees' Retirement System and Performance Food Group’s $1.3 billion sale to The Blackstone Group and Wellspring Capital Management, both of New York.
Last year, Evercore brokered the $29 billion sale of credit card transaction processor First Data Corp. to New York’s Kohlberg Kravis Roberts.
Evercore moved to strengthen its restructuring franchise earlier this year with the hire of former Bear Stearns financial restructuring group head Daniel Celentano as a new senior managing director. He joins senior managing directors William Repko and David Ying in the firm’s restructuring practice, which has handled numerous assignments for companies like United Airlines, Enron, WorldCom and Chrysler Corp. among others (to read Celentano's recent interview with IDD, click here).
Like some of its bulge-bracket counterparts, Evercore also makes direct equity investments. The firm said in May, however, that it had postponed the raising of its third limited partnership and planned to close its Los Angeles office and consolidate its private equity team in New York.
It’s a move that comes as its collection of annual management fees from its private equity business has declined 44% from $7.1 million in the first half of 2007 to $4 million this year.
Evercore released its latest financial results in late July, which were down from last year’s second quarter and first half of year. It reported net income of $5.8 million for the second quarter and $10.3 million for the first half of 2008 on $60.1 million and $104.6 million in second-quarter and first-half revenues, respectively.
Not surprisingly, given the tough credit market and depressed private equity deal business, Evercore’s M&A advisory revenues declined 30% to $98.4 million in the first half of 2008, compared with $140.7 million for the prior-year period.
Beutner, who also worked with Altman at Blackstone prior to Evercore, announced his retirement as co-CEO in April in the wake of a bicycling accident. Separately, former vice chairman and co-founder Offensend, an ex-Oak Hill Partners and Lehman Brothers Merchant Banking executive, left four years ago to accept a position as senior vice president and chief administrative officer at the New York Public Library.
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