Russell Investments, the indexing and fund-management unit of Northwestern Mutual Life Insurance Co., is drawing takeover interest from suitors including Blackstone Group LP (BX:US) and Bain Capital LLC as Goldman Sachs Group Inc. solicits bids for the firm, people with knowledge of the matter said.
Russell may fetch about $3 billion in a sale, which Northwestern Mutual said it was considering in January, according to two of the people, who asked to not be named because the talks aren’t public. While Russell is made up of two businesses, the Milwaukee-based insurer wants to keep it whole rather than splitting it up, two of the people said.
Russell, founded in 1936 and based in Seattle, consists of an index business that owns benchmarks such as the Russell 2000 Index and a money manager with $257 billion in assets. The other dominant index creators, such as S&P Dow Jones Indices LLC, MSCI (MSCI:US) Inc. and FTSE, aren’t tied to an asset manager, presenting an obstacle to buyers wanting a pure-play benchmarking business.
Jean Towell, a spokeswoman for Northwestern Mutual, declined to comment and referred to the insurer’s previous statement that it was weighing a sale of the unit. Andrew Williams of Goldman Sachs also declined to comment, as did Blackstone’s Christine Anderson and Charlyn Lusk, a spokeswoman for Bain Capital at Stanton Public Relations & Marketing.
Other potential bidders could come from outside the private-equity industry, one person familiar with the matter said.
Russell and its rivals make money licensing their indexes to money managers and exchanges, which create products like mutual funds and futures contracts linked to the benchmark. The iShares Russell 2000 ETF (IWM:US) managed by BlackRock Inc., for instance, has about $28 billion in assets.
The world’s largest exchange-traded fund, the $159 billion SPDR S&P 500 ETF Trust, is linked to the Standard & Poor’s 500 Index. That measure is owned by S&P Dow Jones, a joint venture of McGraw Hill Financial Inc. and exchange owner CME Group Inc.
Additionally, investors use indexes to benchmark their performance; about $4.1 trillion of assets are evaluated against Russell’s U.S. measures.
The indexing industry has seen recent mergers. CME Group took control of News Corp.’s index unit in 2010, then fused it with McGraw-Hill’s benchmarking division in 2012. Their S&P Dow Jones Indices joint venture houses both the Dow Jones Industrial Average and the S&P 500. Contracts on the latter index are among the most- traded products at Chicago-based CME Group, which owns the world’s largest futures exchange.
While Russell’s stock isn’t publicly traded, its rivals benefited in 2013 amid the biggest U.S. equity rally since the 1990s. Index provider MSCI advanced 41 percent, compared with the S&P 500’s 30 percent gain. A measure of asset managers and financial planners in the S&P 500 climbed 45 percent, led by Ameriprise Financial Inc.’s 84 percent jump.
In 2012, Northwestern Mutual sold Russell’s Seattle headquarters for $480 million, the largest deal for a single office building in the western U.S. since 2006. It purchased the 42-story facility in 2009 after the collapse of previous owner Washington Mutual Inc., which had its headquarters there.
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