Primus Financial buys US broker Chapdelaine

Financial services-focused private equity firm Primus Financial buys US inter-dealer broker Chapdelaine & Company.

Private equity firm Primus Financial Holdings yesterday announced a deal to buy US inter-dealer/broker Chapdelaine & Company.

Chapdelaine, also known as Chappy, bills itself as a municipal bond broker's broker. It currently has offices in New York, Chicago and Florida and employs approximately 200 professionals in the inter-dealer broker business, and in sales, research analysis and trading. No financial terms of the deal were disclosed.

Chapdelaine is closely held and still owned by the family who founded it in 1966. Primus Financial is acquiring a controlling interest in the firm and is also providing, or arranging, a "substantial capital facility for the purpose of funding anticipated growth of the business" the two firms said in a release. Chapdelaine will have a book value of approximately $100 million and its employees will own a significant equity stake when the deal closes later this year after regulatory approvals are received.

The industry in which Chappy operates fits in well with the stated strategy of Primus Financial, which was set up by former Citibanker Robert (Bob) Morse, Huan Guocang and Ng Wing-Fai in April 2009. It started out with an initial permanent capital of $1 billion raised from ultra-high-net-worth investors. Its intention is to build a financial services institution encompassing insurance, banking, brokerage, advisory and wealth management services. However, Primus Financial has clearly said that its strategy is to create an Asia-based financial services firm and it is not immediately clear how Chappy will fit in with those plans.

"The aftermath of the upheaval on Wall Street has demonstrated that there is a huge opportunity for Chapdelaine to grow and succeed," said Morse, who is co-chief executive officer of Primus Financial, in a written statement. "With the addition of significant capital, Chapdelaine & Co is well positioned to grow its talent pool, expand its leadership position and continue the sound execution of its business plan."

Simpson Thacher & Bartlett acted as legal counsel for Primus Financial. Sullivan & Cromwell acted as legal counsel for Chapdelaine.

Primus Financial last year tried to close its first deal when it agreed to buy American International Group's 97.57% stake in Taiwan's Nan Shan Life Insurance for $2.15 billion. The buy-side comprised a consortium of Primus Financial and Hong Kong-listed China Strategic Holdings. A few days after the deal was announced Taipei-based financial services group Chinatrust Financial Holding Company agreed to buy a 30% stake in Nan Shan from China Strategic for $660 million. However, the deal has been embroiled in controversy since it was announced with rumours circulating that China Strategic is being funded with money from mainland China. Taiwanese regulators are due to rule on the deal by June. Primus is being advised on its bid for Nan Shan by Deutsche Bank, Simpson Thatcher & Bartlett and LCS & Partners. Nan Shan is advised by Blackstone Advisory Partners and Morgan Stanley, with legal advice from Debevoise & Plimpton and Lee & Li.  Chinatrust is advised by Nomura.

Huan and Ng have already floated an earlier private equity fund, Primus Pacific Partners, in 2005 to invest in financial services businesses in Asia. Primus Pacific is fully invested. One of Primus Pacific's investee companies, Eon Capital, the holding company for Eon Bank, is currently in play. Eon is evaluating a takeover offer from Malaysia's Hong Leong Bank. Primus became the largest shareholder in Eon after acquiring a 20% shareholding in 2008.

Hong Leong first made known its intentions to make an offer for Eon Bank in December 2009 when it sought approval from Malaysian banking regulator Bank Negara to initiate discussions with Eon Bank's controlling shareholder Eon Capital. It subsequently tabled its first offer to buy Eon Capital for an all-cash offer of M$4.9 billion ($1.5 billion) in January. However, Eon rejected the bid as inadequate in February. Early this month Hong Leong increased its offer to M$5.1 billion. Eon has agreed to table the offer to shareholders although it has requested that the all-cash offer be revised to include some equity in Hong Leong. Hong Leong is being advised by CIMB. Eon is being advised by Goldman Sachs.

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