Bluestone News

Cerberus Capital swallows Bluestone [Australasia] in latest lending deal

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New York-based Cerberus Capital Management plans to use its acquisition of the local [Australasian] operations of non-bank lender Bluestone Group as a springboard to grow further in Australia and the region.

In what appears to be Cerberus' first foray into Australia, the private equity and lending giant agreed over the weekend to acquire Bluestone's businesses in Australia, New Zealand and the Philippines for an undisclosed price.

While both sides declined to comment, The Australian Financial Review understands the transaction value of the purchase is in the order of $103 million. That reflects a ratio of two to three times the lending and loan servicing group's local net assets of $41.2 million.

Cerberus has $US30 billion under management and as well as private equity has large global business finance and real estate arms.

The latest transaction heralds the third private equity-style investment in Australia's mortgage market over the past 12 months, as players seek to capitalise on a retreat by the major banks in a number of areas, including loans to foreigners.

KKR & Co's credit team acquired ASX-listed Pepper Group last year while Blackstone has snapped up a controlling stake in La Trobe Financial.

"Ultimately for us it is providing a balance sheet for the business [Bluestone], so it can grow and expand, with additional product lines in partnership with management," a Cerberus spokesman said. "Beyond this transaction we are looking at more opportunities in company platforms and or assets in the loan and real estate space."

Bluestone has a circa $6 billion loan book and typically lends to those that fall outside the remit of the major banks. It also has a loan servicing and origination unit and buys and manages loan books.

The company was founded 18 years ago by Alistair Jeffery as a non-conforming home loan group competing with the likes of larger rival Liberty Financial.

"Whilst I'm sad to be ending my near 20-year association with the Australasian businesses, I'm very proud of what has been achieved here, and I'm very excited for the local team and their new shareholders," he said.

"The Australian and New Zealand mortgage markets are renowned globally for innovative products, a quality macro-prudential environment, and strong self-regulation among the lenders. I'd like to think that Bluestone contributed in a small way."

The transaction was two-pronged in that it allowed for the buyback [by Bluestone Group] of major shareholder Lloyds Development Capital's Bluestone holding, ending its four-year investment.

That facilitated a buyout of Bluestone's operations in the United Kingdom and Ireland, delivering Mr Jeffery a controlling stake in that business, Macquarie Group a 30 per cent holding and group chief Peter McGuinness 10 per cent.

Street Talk revealed last year that a strategic review was under way at Bluestone and last week foreshadowed that Cerberus was in exclusive talks to acquire the local operations.

Campbell Smyth will continue to run Bluestone's Australian and New Zealand business.

The Cerberus deal is subject to regulatory approvals, including that of the Foreign Investment Review Board.

Mr Jeffery said following the separation, Bluestone's British operations would assess applying for a banking licence there and moving into consumer lending.

Bluestone was advised by Rothschild, Addisons, Clayton Utz and PwC while Cerberus took counsel from law firm Allens and Deloitte.