A wrecking ball has hit ING Groep NV's global supermarket of financial services, whose many parts include a $600 billion global asset management business and a U.S broker-dealer network of 8,700 reps and advisers.
Last Monday, regulators in Europe ordered the Dutch financial conglomerate to be broken up as the price for a taxpayer bailout of 10 billion euros ($14.9 billion).
ING, under pressure to repay the government bailout, announced that it is splitting up its banking and insurance operations. As part of that announcement, the firm said it is looking at initial public offerings and divestitures as options.
Catherine Smith, chief executiveof ING U.S. Retirement Services, in a conference call Friday afternoon with companies that sell ING products, said an internal group was preparing for at least one IPO, if not more than one.
The move to break up ING proves financial services firms are facing a new day, one analyst said.
“The fact that the best strategic response ING can come up with — the breakup of the firm — shows the extent of the carnage in the industry,” said Sean Cunniff, research director for brokerage and wealth management at The Tower Group Inc.
“Things that were unimaginable two years ago” are now happening, he noted.
Adding to the confusion is the current regulatory limbo in the United States as lawmakers determine the new ground rules for a number of financial services businesses, he said.
One of the units that could be the subject of an IPO is ING Investment Management, according to industry sources.
Taking the unit public would make more sense for ING than selling it outright, because the company probably won't get the price it wants for such a big business, experts said.
“You are talking about $600 billion in assets under management, and there are not too many firms that can buy it,” said one asset management banker, who asked not to be identified. “The IPO is probably the more practical outcome.”
An IPO is also preferable to splitting up the investment management business and selling it in pieces, because “that's just a lot of work,” the banker said.
The case for a spinoff is strengthened by the recent revival of the IPO market, said Alan Rambaldini, an equity analyst with Morningstar.
“Their primary concern is to get the highest price so that they can pay the Dutch government back,” Mr. Rambaldini said. “ING is a well-established company, and they could do well coming out with an IPO.”
An ING spokesman declined to comment on speculation about the investment management business.
“It's too early to come to any form of conclusion or even a suggestion of what the company is going to do,” said spikesman, said Frans Middendorf. “It's something that will be explored over the next months and years.”
The company plans to complete its restructuring by 2013.
Meanwhile, industry sources said last week that Lightyear Capital LLC is among the leading firms pursuing the broker-dealers that make up most of the ING Advisors Network Inc.
Donald Marron, the chairman and chief executive of Lightyear, has plenty of experience in the retail-brokerage business. He is the former chairman and CEO of PaineWebber Group Inc.
Whatever happens isn't going to happen for several months, the asset management banker said. “I don't think anything will happen in 2009.”
Lightyear Capital has been chasing independent broker-dealers over the past few months. It was the finalist for the broker-dealers in the AIG Advisor Group until that deal was pulled off the table in August by Robert Benmosche, the new CEO of American International Group Inc.
The potential sale of ING's -broker-dealers springs from a strategic review that ING Group has been conducting of its sprawling operations, including its retail broker-dealers.
The broker-dealers said to be on the table — Financial Network Investment Corp., Multi-Financial Securities Corp. and Primevest Financial Services Inc. — fall under ING U.S. Retirement Services.
Another broker-dealer, ING Financial Partners, has not been discussed as part of any sale.
An ING spokesman, Dana Ripley, said he would not comment about Lightyear Capital's potential interest in the broker-dealers.
“We're making very good progress with the strategic review and hope to conclude it in the near term,” he said.
It is unclear what other private-equity or broker-dealer firms were pursuing the ING broker-dealers.
A Lightyear spokeswoman, Amanda Kiley, said she would not comment about speculation in the market about Lightyear's interest in the ING broker-dealers.
The three broker-dealers have about 5,800 reps and advisers and a reported $631 million in gross revenue last year.
ING has also agreed to divest its U.S.-based ING Direct unit by the end of 2013.
That unit, best known for its $91 billion in assets online banking operation, also owns Sharebuilder Securities Corp., which provides online discount brokerage as well as a service that allows investors to buy fractional shares of stocks and ETFs on a weekly, bi-weekly or monthly basis for as little as $1 per transaction.
With reporting by Dan Jamieson
E-mail Bruce Kelly at [email protected]. E-mail Jessica Toonkel Marquez at [email protected].
