Blackstone sells 36% stake in Rothesay Life to GIC and MassMutual

By Kritika Venkat, Varshika Prasanna, Aman Singla (NYU)



Private equity giant, Blackstone, sold its 36% stake in UK based life insurer, Rothesay Life, to US-based mutual life insurer Massachusetts Mutual Life Insurance (MassMutual) and Singapore sovereign wealth fund GIC. GIC and MassMutual already own a significant stake in Rothesay but will now have 49% each of the company after the deal. Blackstone sold its stake for £2.1bn on September 30, 2020, valuing the privately owned UK insurer at £5.75 bn.

GIC, Blackstone, and MassMutual initially purchased shares in Rothesay in 2013 and the Private Equity firms owned 26.5% whilst MassMutual owned 6.5% back in 2016. In 2017, the three firms took Goldman Sachs’ 32.7% stake resulting in all three of them increasing their interest and stakes substantially. The deal in itself has increased Rothesay’s valuation significantly as it was valued at £2 bn when Goldman sold their stake and now is valued at more than double the amount it was three years ago.

Although Rothesay has been said to be eyeing an initial public offering, the private company came out saying that their extensive support from private shareholders resulted in no requirement for their shares to float. Rothesay’s growth has been impressive with its growth in AUM (Assets Under Management) from £7.5bn to £56bn since 2013. The group has pensions of more than 800,000 people and is always looked upon for pension solutions by many UK companies.

Overview of Blackstone

Blackstone is one of the world’s leading investment firms and has maintained a rigorous deal approval process with all employees voting on a deal before it is fully considered. The investment giant has approximately $151.5 billion in liquidities which supported them in the first quarter when the company incurred a net income loss of $2.6 billion. been used to purchase companies using a strategy called leveraged buyouts. Recently, several PE investors have seen to ride the liquidity wave to exit holdings. Blackstone also sold a 23% stake in Essel Propack Ltd in early September in this COVID environment of excess liquidity.

Overview of GIC

GIC Private Limited is a long term investor with more than 100 billion USD in assets across 40 countries. They leverage their strengths to enhance the international purchasing power of their assets by following a strategy called Long Term Orientation. They invest in public and private markets and also have cross-asset groups like Economics & Investment Strategy and Integrated Strategies Group. The Singapore based investment firm builds their portfolio such that they adhere to the Singapore Government’s risk parameters. In such an uncertain environment, GIC’s allocation strategy of having a policy portfolio with six asset classes (Developed Market Equities, Emerging Market Equities, Nominal Bonds and Cash, Inflation-linked Bonds, Private Equity, and Real Estate) diversifies their portfolio and minimises risk over the long term period.

SOURCE: GIC: Managing The Portfolio

GIC Report on the Management of the Government's Portfolio for the Year 2019/20

GIC’s strategy is driven by both top-down and bottom-up analyses. The top-down analysis is where the company reviews macroeconomic trends such as politics, corporate governance, and currency as well as some industry trends and catalysts. The bottom-up investing approach looks at company-specific trends, recent deals, their financials, supply and demand in order to make a sound investment decision. However, GIC prides itself on long-term value investing as most of their deals are held for more than 4 years and deliver good long-term returns. Thus, it is no surprise that GIC maintained its interest in Rothesay and upped its stake significantly, strategically paving the way to a lucrative future.

Overview of MassMutual

MassMutual is an American mutual life insurance company founded in 1851 with more than 5 million clients across the world. They provide life insurance, disability income insurance, long terms insurance, retirement/401k plan services, and annuities. The diverse range of financial products they offer makes them a strong and steady company in the insurance sector. The company’s exceptional performance is marked by their strong balance sheet and other financials. In 2019, its surplus increased by 21% to $18.9 bn and total adjusted capital rose up to $24.5 bn, a whopping 23% increase. The Fortune 500 company had their highest dividend payout totalling $1.7 bn last year as well. The company soared through the Great Depression and the 2009 Financial Crisis and pays credit to their ‘well diversified General Investment Account’ that maintains the ability to ‘weather downturns in financial markets’.

“MassMutual and GIC are the natural long-term holders for Rothesay”- Qasim Abbas, Senior Managing Director at Blackstone