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Mark Walter, chief executive officer of investment firm Guggenheim Partners, is a Chicago resident with Cubs season tickets. When the financially troubled Los Angeles Dodgers franchise went on the market, he didn’t let loyalty get in the way of dealmaking. Walter is the controlling partner of the group—it includes former Los Angeles Lakers player Earvin “Magic” Johnson and baseball executive Stan Kasten—that purchased the Dodgers for $2.15 billion in a deal that closed on May 1.
Walter’s foray into sports ownership doesn’t mean he’s giving up his day job running Guggenheim, where he has refashioned a manager of family money into a global firm that manages more than $125 billion and provides investment banking services. Walter, 51, has built up the company’s offerings in exchange-traded funds, the fastest-growing product in the money-management industry, thanks to the acquisitions of fund providers Claymore Group, announced in 2009, and Security Benefit in 2010. The firm is now one of the 10 largest ETF providers in the U.S. with offerings such as the Guggenheim S&P 500 Equal Weight ETF and Guggenheim BRIC ETF (EEB).
Walter’s growth drive suffered a setback earlier this month when talks to buy three of Deutsche Bank’s (DB) four asset-management units fell apart. Adding those operations would have more than quintupled Guggenheim’s assets and put it on par with the likes of Legg Mason (LM) and Franklin Resources (BEN).
Headquartered in New York and Chicago, Guggenheim Partners was formed in 2000. Its founders include Walter, Peter Lawson-Johnston II, a descendant of Meyer Guggenheim, and Todd Morley, who owned a mortgage securities business. It succeeded Guggenheim Brothers, which had been overseeing family money. The Guggenheims derive their wealth from Meyer, a Swiss tailor who came to the U.S. in the 1840s and made a fortune in mining and smelting. Family money helped bankroll prominent Guggenheim museums in New York and Bilbao, Spain.
As it grew, Guggenheim Partners raised money from outside investors such as Sammons Enterprises, a Dallas company with interests in industrial products and insurance. Today, Guggenheim has more than 2,200 employees at more than 25 offices in nine countries.
For all that, what brought Walter into the spotlight was his deal for the Dodgers, which he did separately from Guggenheim Partners. The price Walter’s group paid may have been as much as $850 million more than the runner-up bid. A rival group of investors led by Steve Cohen, who runs SAC Capital Advisors, offered the next-highest bid at $1.3 billion, a person familiar with the bidding, who asked not to be identified because no one was authorized to speak on the matter, said in March. Walter declined to comment for this story.
Some analysts see the price as reasonable. “A franchise as storied as the L.A. Dodgers often trades based on the same dynamics that a painting might trade on,” says Steve Patterson, president of Houston-based Pro Sports Consulting, which advises professional and college teams on transactions and media deals. “There’s only one L.A. Dodgers franchise.” Those who think Walter overpaid fail to appreciate how much the media rights add to the franchise’s value, Patterson says. The team’s TV contract with News Corp.’s (NWSA) Fox Sports expires after the 2013 season. The bidding for Dodgers rights will “drive a number that’s never been seen before,” he says.
Whatever the merits of the Dodgers purchase, Walter seems likely to keep building Guggenheim Partners. He has hired investing veterans including Henry Silverman, the former chief operating officer of Apollo Global Management, to advise on deals. Silverman joined in March as vice chairman of the investment management business. Guggenheim Partners is still talking with Deutsche Bank about purchasing RREEF, a division that invests in real estate and infrastructure and has €49 billion ($63 billion) under management. Howard Tai, a senior analyst in the capital markets group of Boston-based research firm Aite Group, sees more acquisitions beyond that one. “RREEF by itself won’t satisfy Walter’s appetite for expansion,” he says.
The bottom line: Walter has built Guggenheim Partners into a global money manager with more than 2,200 employees and $125 billion in assets.