According to
Bloomberg
,
Wells Fargo & Company
(
WFC
), one of the Wall Street giants, decided to sell its majority
stake in Overland Advisors LLC, a privately owned hedge fund
supporter. Founded in January 2010, Overland operates as a
subsidiary of Wells Fargo.
Though the terms of the transaction were not disclosed, the
stake will be sold to a new company controlled by Gordy Holterman,
Overland's chief executive officer and Derek Dunn, the chief
investment officer of Overland, according to the source. Moreover,
through this stake sale, Wells Fargo will retain minority interest
in $2.2 billion worth of hedge funds.
Wells Fargo has started retreating money from the fund and aims
to complete the process in 2014. The bank has more than $1.6
billion invested in Overland, while external investors account for
about $520 million.
Over the past two years, with the increase in Overland's
external client base, the fund has recorded strong growth
performance. Therefore, following the completion of the deal,
Overland's clients will be benefited as the fund will be better
positioned for continuing success as an alternative
asset-management firm.
For this agreement, Overland is seeking approval from a bulk of
unaffiliated investors. In addition to this, the company
anticipates the transaction to close in April 2012.
Like other big Wall Street banks such as
The
Goldman Sachs Group Inc.
(
GS
) and
Bank of America Corporation
(
BAC
), Wells Fargo has been buckled under the weakness in the wider
economy and the fundamental pressures on the banking sector. Wells
Fargo's stake selling in hedge fund corresponds to the proposed
rules as part of the Dodd-Frank Act, which aims to ban proprietary
trading and ownership of hedge funds by banks. The new federal
rules, once implemented, will limit banks' rights of hedge
funds.
However, last week, Wells Fargo Bank, banking unit of Wells
Fargo, has entered into a definitive agreement to purchase BNP
Paribas' North American reserve-based and associated diversified
energy lending business in an all-cash deal. The deal, subject to
regulatory approvals and other customary closing conditions, is
anticipated to close in the second quarter of 2012. The purchase is
expected to strengthen Wells Fargo's energy banking business.
Earlier in February, Wells Fargo announced that it has
accomplished the purchase of Burdale Financial Holdings Limited
(Burdale) and the portfolio of Burdale Capital Finance Inc. from
Bank of Ireland
(
IRE
). The acquisition was a part of the company's effort to broaden
its international commercial finance capabilities.
Going forward, we believe that strategic acquisitions will help
Wells Fargo expand its business and improve its profitability. Its
solid business model, strong capital position and expanded business
through the Wachovia acquisition and its integration, expected
expense management and improved credit quality, will also support
its profit figures. Yet, a sluggish economic recovery and its
impact on revenue along with new proposed regulations might limit
its growth to some extent.
Wells Fargo currently retains a Zacks #3 Rank, which translates
into a short-term 'Hold' rating. Considering the fundamentals, we
also maintain a long-term "Neutral" recommendation on the
stock.
BANK OF AMER CP (
BAC
): Free Stock Analysis Report
GOLDMAN SACHS (
GS
): Free Stock Analysis Report
IRELAND BK-ADR (
IRE
): Free Stock Analysis Report
WELLS FARGO-NEW (
WFC
): Free Stock Analysis Report
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