Franklin Resources Inc. Ticker:(BEN) is taking another step into the alternatives universe with the acquisition of K2 Advisors Holdings LLC, a $9.3 billion funds-of-hedge-funds firm.
In the deal, which was announced this morning and is expected to close later this year, Franklin initially will buy a majority stake in K2 and a schedule will be set to complete acquisition of 100% of the company over the next few years.
Franklin Resources, which operates as Franklin Templeton and is mostly known as a retail-oriented mutual fund company, has $731 billion under management. But the company also has a well-established and growing alternatives investments footprint, which was enhanced two years ago through its purchase of a 20% ownership stake in the alternatives shop Pelagos Capital Management LLC.
Franklin spokesman Bill Weeks would not disclose how much of the company’s assets are represented in the various alternatives platforms, but he did confirm that K2 will be “folded into the broader alternatives platform.”
Founded in 1994 and based in Stamford, Conn., K2 is one of the nation’s largest funds-of-hedge-funds firms, primarily managing money for institutional clients.
The deal puts to rest months of speculation about a suitor for K2. As recently as June, it was reported that management was in talks with
The Carlyle Group, a private-equity firm.
K2 will use proceeds from the Franklin deal to purchase all equity held by TA Associates Management LP, a private-equity firm that bought a minority stake in K2 in 2007, when K2 had just $5.5 billion under management.
“By joining forces with Franklin Templeton, we are solidifying our position as a leading funds-of-hedge-funds manager in an evolving alternatives investment landscape,” said David Sanders, who co-founded K2 along with William Douglass.
“This has been a management-led effort to seek out the best partner to replace TA,” Mr. Sanders said. “From the outset, we were attracted to Franklin Templeton’s established global presence and its extensive resources in distribution, operations and technology.”
In a statement, Franklin chief executive Greg Johnson described the deal as part of the company’s overall plan to continue expanding into the alternatives investment space.
“One of the ways that we have built Franklin Templeton’s global business is by making strategic investments in smaller, highly experienced asset management companies whose expertise complements Franklin Templeton’s global offerings and meets our world-class standards,” he said.
“This new relationship with K2 is an important step in our overall plan to expand Franklin Templeton’s alternatives strategies and solutions platform.”
