PE Firms Buying American Beacon

Pharos Capital and TPG Capital have agreed to buy American Beacon Advisors, the asset management subsidiary of American Airlines parent company AMR Corp. The deal is valued at approximately $480 million, with AMR retaining a minority ownership position.  




AMR Corporation, the parent company of American Airlines, Inc., announced today that it has reached a definitive agreement to sell American Beacon Advisors, Inc., its wholly owned asset-management subsidiary, to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, two leading private equity firms. AMR will receive total consideration of approximately $480 million. While primarily a cash transaction, AMR will retain a minority equity stake in the business. AMR expects to close the sale this summer subject to satisfactory completion of customary closing conditions as well as the approval of the Board of Trustees of the American Beacon family of mutual funds, shareholders of the American Beacon family of mutual funds, and consents from other American Beacon clients.



AMR, which has been engaged in an ongoing strategic value review process related to certain businesses under the AMR umbrella, believes that the sale is in the best interests of AMR and its shareholders and will benefit American Beacon, its employees, customers and other stakeholders. The sale is intended to allow AMR and its shareholders to recognize the full value of American Beacon while allowing AMR to focus on its core airline business. American Beacon currently provides a number of services for AMR and its affiliates, including cash management for AMR and investment advisory services and investment management services for American's pension, 401(k) and other health and welfare plans. AMR anticipates that it will continue its relationships with American Beacon after the closing. However, to ensure that continuing relationships between American Beacon and American's pension, 401(k) and other health and welfare plans after closing satisfy the fiduciary duties and other rules that apply to these plans, an independent third party has been engaged to review and approve any such continuing relationships.


In addition to currently providing these investment management services and asset oversight services to AMR, American Beacon currently serves as the investment manager of the American Beacon Funds, a family of mutual funds with both institutional and retail shareholders, and provides customized fixed income portfolio management services. Subject to the approval of the shareholders of the American Beacon family of mutual funds, it is anticipated that American Beacon will continue to be investment manager for the mutual funds.


American Beacon Advisors has consistently grown since its creation in 1987, adding new products and growing average assets under management to $65 billion in 2007. For 2007, on a separate company basis, American Beacon's gross revenue was $101 million and income before income taxes was approximately $48 million, both of which increased approximately 40 percent over 2006.


“The decision comes after a careful evaluation of the strategy that we believe will deliver the most value to our shareholders and create the ownership structure that makes the most sense for American Beacon,” said AMR Chairman and CEO Gerard Arpey. “What started out more than 20 years ago as a smart way to manage AMR's benefit plans and cash has evolved and grown significantly into a successful financial management and advisory firm that is fully capable of standing on its own and is well positioned to pursue further growth opportunities outside of AMR.” Arpey added that AMR is looking forward to engaging American Beacon for cash management services after the transaction closes and will remain actively engaged with American Beacon through a 10 percent ownership interest.


“Pharos and TPG believe that the asset management business is a robust sector, in which American Beacon is a strong leader, with an outstanding, 20-year track record of performance in multiple asset classes across a variety of investment cycles,” said Kneeland Youngblood, co-founder and managing partner of Pharos Capital. “We look forward to working with the American Beacon team and TPG to fully leverage its strengths into industry-leading growth as well as continuing its superior customer service and performance. And, we welcome the opportunity to work with AMR not only as a significant client, but also as a long-term partner.”


“Having significantly grown our third-party revenue over the past several years, we believe the timing of the divestiture is just right for our company, our customers and our employees,” said American Beacon Advisors Chairman William F. Quinn. “We're looking forward to focusing on growing our core business, while continuing to serve the needs of our customers and building on our successful history under a new ownership structure. Our management team and employees are excited about the many opportunities that this transaction will present to American Beacon, and our customers can rest assured that we intend to provide the same high level of service and expertise that they have come to expect from American Beacon in the past.”


Credit Suisse advised AMR on the transaction and Rothschild Inc. continues to advise AMR in its ongoing strategic value review. Merrill Lynch & Co. acted as exclusive financial advisor to Pharos Capital and TPG Capital.


About AMR Corporation


AMR is the parent company of American Airlines and American Eagle Airlines. American Airlines is the world's largest airline. American, American Eagle and the AmericanConnection airlines serve more than 250 cities in more than 40 countries and territories with more than 4,000 daily flights. The combined network fleet numbers more than 1,000 aircraft. American's award-winning website,, provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld Alliance