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BREAKING:

$535B CANADA BUDGET PROJECTS $39.8B DEFICIT, AIMS TO RESTORE ECONOMIC FAIRNESS

It seeks to ease the housing and affordability crisis by making older, wealthier Canadians pay more

Blackstone, TPG Capital to Buy Kensington for GBP 180M

Zacks Equity Research

The Blackstone Group L.P. (BX) and TPG Capital LP have agreed to buy U.K.’s sub-prime mortgage lender – Kensington – from its South African parent company, Investec Plc for £180 million ($289.7 million) in cash. The deal enhances Blackstone and TPG Capital’s presence in the lucrative U.K. housing market.

Kensington is being purchased by Blackstone’s Tactical Opportunities division and TPG Capital's TSSP special situations and credit platform. Further, the deal still requires the customary regulatory and anti-trust approvals.

Notably, the price paid is based on tangible net asset value of £165 million as of Mar 31, 2014 and includes some other mortgage assets as well. As of Mar 31, 2014, Kensington held assets worth £3.7 billion and employed around 140 people.

Further, Blackstone and TPG Capital will be infusing additional capital into the acquired business. This would enable expansion of Kensington’s specialist lending to self-employed homebuyers and landlords. Additionally, Kensington will be under a new chief executive, Ian Henderson.

Kensington was acquired by Investec in 2007 for £283 million ($473 million). However, the transaction turned out to be ill-timed due to the financial crisis.

Post the financial crisis, Investec has been keen on simplifying its operations. Its decision to divest Kensington in Feb 2014 reflects the same target. Other firms like Lonestar, a U.S. property investor, Virgin Money and The Goldman Sachs Group, Inc. (GS) had also shown interest in the division.

For Investec, the deal is a step toward simplifying its businesses and bolstering its balance sheet. The firm plans to utilize the proceeds to expand its U.K. specialist banking operations.

Blackstone and TPG Capital foresee tremendous growth potential in U.K.’s mortgage market. Residential real estate prices have been appreciating in the country as prices in the three months ended Aug 2014 were 9.7% higher than in the comparable period last year, as per Halifax.

Currently, Blackstone carries a Zacks Rank #2 (Buy). Some better-ranked asset managers include AllianceBernstein Holding L.P. (AB) and SEI Investments Co. (SEIC). Both these stocks sport a Zacks Rank #1 (Strong Buy).

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Zacks Investment Research