Dea Capital spa announced yesterday the signing of a series of agreements with Quaestio Holding and Quaestio Capital Management sgr that will lead, on the one hand, the listed group controleld by Dea Agostini to acquire a stake in Quaestio Holding ranging between 35% and 44% and that, on the other hand, will see lternative funds management company Dea Capital Alternative Funds sgr taking over the management of the Atlante and sItalian Recovery Fund funds (see the press release here). The two deal should be completed within the first few months of 2020.
Quaestio shareholders had long given a mandate to the advisor Colombo & associati to evaluate an overall reorganization of the group and already last March there were rumors about talks with Dea Capital Alternative Funds sgr as counterparty to take over the management of the two funds dedicated to the distressed asset (see here a previous post by BeBeez). However, it seems that assessments on the future of the management company have been accelerated by the expiry of the mandate of the chairman of Fondazione Cariplo, Giuseppe Guzzetti.
Quaestio Capital sgr is actually wholly owned by Quaestio Holding, which in turn is now 41.2% controlled by Fondazione Cariplo, chairman Alessandro Penati and the management team with an overall share of 27.8% and as for a 31% by others institutional investors (Cassa Italiana di Previdenza ed Assistenza dei Geometri Liberi Professionisti, Fondazione Cassa di Risparmio di Forlì, Direzione Generale Opere Don Bosco).
In detail, the business unit that will be transferred to Dea Capital Alternative Funds sgr essentially consists of the mandates for the management of the Atlante fund and the Italian Recovery fund (as well as the Italian Recovery Fund II, in the launch phase), with total assets of approximately 2.5 billion euros, in addition to the management team and the contracts pertaining to the aforementioned management mandates. The management company closed 2018 with management fees of 36.9 million euro, of which about 7 million relating to the non-performing loans management activity, and a net profit of 2.9 million euros. Dea Capital will pay 12.2 million euros for the company branch. The closing of the transaction is obviously conditioned, inter alia, by the authorization of the Bank of Italy and the approval by the shareholders’ meeting of the Atlante and Italian Recovery Funds regarding the appointment of Dea Capital Alternative Funds sgr as new manager.
The first Atlante fund was signed in Spring 2016 for a total of 4.25 billion euros from 67 Italian and foreign institutions, which included banks, insurance companies, banking foundations and Cassa Depositi e Prestiti (see here a previous post by BeBeez) and had been invested in Banca Popolare di Vicenza and Veneto Banca, the two Veneto Region-based banks then defaulted. The default led to a heavy devaluation of the funds’ stakes. But the Atlante fund had also invested 800 million euros in stakes of the Atlante II fund. The latter was then renamed Italian Recovery Fund in October 2017 (see here a previous post by BeBeez).
The Italian Recovery Fund has been involved in four securitization transactions relating to NPEs for approximately 31 billion euros GBV and a total equity investment of approximately 2.5 billion euros. The credits in question were originated by Nuova Banca Marche, Nuova Banca dell’Etruria, Nuova Cassa di Risparmio di Chieti, Nuova Cassa di Risparmio di Ferrara, Cassa di Risparmio di Cesena, Cassa di Risparmio di Rimini and Cassa di Risparmio di San Miniato and Nuova Banca Marche, Nuova Banca dell’Etruria, Nuova Cassa di Risparmio di Chieti, New Cassa di Risparmio di Ferrara, Cassa di Risparmio di Cesena, Cassa di Risparmio di Rimini and Cassa di Risparmio di San Miniato and Banca Mps. In particular, the fund subscribed for 805 million euros the mezzanine tranche of Montepaschi’s 26 billion euros securitization (see here a previous post by BeBeez).
As for the acquisition of the relative majority of Quaestio Holding. Dea Capital will buy all the shares of Alessandro Penati and other minority stakes. The overall stake that Dea Capital may acquire will depend on the result of the exercise or not of all the pre-emption and co-sale rights of the Quaestio Holding shareholders. However, it is understood that no Quaestio Holding shareholder will have control of the company, that Dea Capital will hold a stake of between 35% and 44% and that Fondazione Cariplo will maintain a participation of no less than 24%. The transaction will be conducted on the basis of an assessment of the entire capital of Quaestio Holding of 30 million euros (that is to say the valorization of the asset management activities of Quaestio sgr, remaining after the sale of those relating to the NPLs), therefore it provides for an outlay maximum for Dea Capital of another 13.2 million, in addition to the 12.2 millions envisaged for the business unit managing the distressed assets.
The calculation does not include an exact figure for the evaluation of the activity of NPLs Servicing, or the Quaestio Cerved Credit Management joint venture between Quaestio Holding (50.1%) and Cerved Group (49.9%). The note issued by Dea Capital explains that the consideration will be defined on the basis of the actual sale value if it is completed by 31 July 2024 or on the basis of a value to be defined between the parties if for that date the sale does not is realized. The joint venture owns the Juliet spa non-performing loan management platform, sold by Montepaschi together with the stipulation of an industrial partnership for special servicing activities on part of the 26.1 billion euros NPLs securitization. However, at the beginning of this month, Mps approved the exercise of the right to withdraw from the ten-year servicing contract entered into with Juliet spa (see here a previous post by BeBeez).
This does not mean that Juliet and Mps will no longer work together. The note of Mps, in fact, specified that the objective is to “preserve the commercial relationship, on different bases than the current ones, combining the necessary flexibility of the bank in the management of its NPE (reacquired following the withdrawal) with the specifications skills developed by Juliet for the reduction of NPE. As part of the agreement, Juliet is expected to participate in terms of market conditions and terms, as the Bank’s advisor in the delimitation of one or more portfolios subject to transfer for a total amount of 3 billion euros of gross value “.
The entire operation announced yesterday by Dea Capital is part of Dea Capital’s alternative asset management expansion strategy, currently concentrated in the management of closed-end funds reserved for institutional investors and which makes the Dea Capital Group the first independent operator in the sector in Italy. Adding the current assets currently under management to the Dea Capital group, ie around 11.9 billion euros, with those of the Quaestio group, the total assets will exceed 20 billion euros.
In particular, Dea Capital Alternative Funds sgr will extend its operations to bad loans and UTPs mall ticket, acquire an expert team in the management of large portfolios and expand the potential investor base to a series of institutional operators, including Fondazione Cariplo and investors – Atlante and Italian Recovery Fund candidates.
Paolo Ceretti, ceo of Dea Capital spa, said: “With the agreements signed, we lay the foundations for another very important step in the development of our alternative asset management platform. Through the acquisition of the Quaestio Non Performing Loan business sgr, we intend to consolidate our strategic positioning in an extremely current alternative investment segment of great interest to us and our investors.With the entry into the capital of Quaestio Holding and the related strategic partnership, we will also integrate our current operations with investment solutions and capital allocation strategies with higher added value, the objective is to offer our customers a broad and integrated management of asset allocation targets, aligned to the best and most current market practices in terms of completeness of the investment classes (liquid, illiquid and alternative), diversification e of risk management ”.
For Quaestio, the deals are functional to the refocusing of the business on the traditional asset management activity and to the reorganization of the shareholding and governance structure, strengthening it thanks to a primary operator such as Dea Capital. The acquisition of the relative majority of Quaestio Holding allows Dea to enter the segment of investment solutions and management mandates. The industrial partnership between the two companies foresees that Dea will not develop its own liquid product offer, committing itself to offering those of Quaestio sgr, and in parallel the latter will not independently develop a new own offer of illiquid products, but will offer those of the Dea Capital group . The companies have also entered into a 5-year shareholders’ agreement which provides that in the event of any subsequent acquisition by Dea Capital spa of the absolute majority of the capital of Quaestio Holding, the other shareholders of the latter have the right to sell the holdings held at Dea Capital spa itself.