Deutsche Bank Expected to Sell Arrowgrass Stake to Foundation Capital Partners

By Juliet Chung 

Deutsche Bank AG is in advanced talks to sell its minority stake in London-based hedge-fund firm Arrowgrass Capital Partners LLP to Foundation Capital Partners, according to people familiar with the matter.

Foundation, a private-equity firm, is expected to pay between $100 million and $200 million for a more than 20% stake in Arrowgrass, which would include Deutsche Bank's 17.5% share, plus additional equity, one of the people said. The deal could wrap up as soon as this month and would value Arrowgrass, which manages about $5 billion as a multistrategy fund, at more than $500 million.

In return, Foundation would share in the stream of management and performance fees brought in by Arrowgrass, which spun out of Deutsche during the financial crisis.

The deal comes amid a rise in deal-making for minority stakes in hedge funds as several firms, including Blackstone Group LP and Neuberger Berman's Dyal Capital Partners, have raised billions in private-equity funds to buy such stakes. Foundation, based in Greenwich, Conn., is headed by former Citigroup and Deutsche executive Dean Barr.

Basel III regulations that impose tougher rules on how big banks manage risks and stockpile capital are a factor encouraging Deutsche to sell its stake, one of the people said.

Write to Juliet Chung at [e-mail]

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