Ruling allows Carlyle to proceed with TCW acquisition

Sat Dec 1, 2012 9:59am IST

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(Reuters) - A federal judge in Los Angeles issued a limited preliminary injunction on Friday that allows the sale of Los Angeles-based asset manager TCW Group Inc to private equity firm Carlyle Group (CG.O) to proceed.

The ruling by U.S. District Court Judge Christina Snyder, related to a claim by a former unit of TCW, EIG Global Energy Partners, that it has the right to approve the transaction, had both sides claiming victory.

In her ruling, Snyder ordered that a fund that is jointly operated by EIG and TCW be placed into a trust, pending the outcome of the arbitration case over whether EIG has the right to approve the sale.

EIG, which has energy funds that compete with Carlyle funds, claims it has the contractual right to approve the transaction as part of its 2011 separation from TCW. It had sought a broader injunction blocking the sale of TCW by Societe Generale (SOGN.PA) to Carlyle altogether.

In her written opinion, Snyder, of the U.S. District Court for the Central District of California, said EIG's interpretation is "more convincing" than TCW's argument. "The Court finds that plaintiff has a strong likelihood of success on the merits," she wrote.

Snyder said the trust, which ensures that the joint fund will remain frozen until the arbitration is complete, is enough to protect EIG's interests.

"We are extremely pleased with the ruling," Blair Thomas, chief executive of EIG, told Reuters. "The judge has accepted our arguments and our case in its entirety. We look forward to moving forward to arbitration where we fully expect the arbitrator to reach the same conclusion."

A Carlyle spokesman said the Washington D.C.-based firm remains committed to the deal with TCW.

"We are gratified by the court's ruling which allows the Carlyle transaction to proceed on schedule," a TCW spokesman told Reuters. "We look forward to closing the transaction on a timely basis.

The dispute involves a joint venture between EIG and TCW that was put in place at the time of the spin-off.

In August, Carlyle had announced it was buying TCW from Societe Generale, clearing up months of uncertainty over TCW's ownership. But weeks later, EIG sued TCW, claiming it had the right to weigh in on any change of control affecting the joint venture.

So far, TCW has weathered the uncertainty well. Investors have poured more than $5.2 billion into the firm's $19 billion TCW Funds this year as of October 31, according to Morningstar Inc (MORN.O). Overall, the $135 billion firm has raised $9.3 billion in net mutual fund flows in 2012, according to TCW.

(Reporting by Joseph Ax, Jessica Toonkel and Greg Roumeliotis in NEW YORK; Editing by Leslie Adler)