JP Morgan Chase is to finally divest its stake in One Equity Partners to Lexington Partners and AlpInvest Partners, in a move that will see the formation of a new investment advisory firm.

Lexington Partners and AlpInvest Partners are to acquire JP Morgan Chase's interests in approximately 50 per cent of the portfolio companies currently held by One Equity Partners, JP Morgan Chase's principal private equity unit.

The terms of the transaction, which is expected to close by year-end and, as reported by the New York Times "realizes a long-held goal" for JP Morgan, were not disclosed.

The One Equity Partners portfolio is valued at a reported $4.5 billion.

The One Equity Partners professionals will form a new private equity investment advisory firm called OEP Capital Advisors, which will become independent from JP Morgan Chase upon completion of the sale.

OEP Capital Advisors will manage the portfolio being sold by JP Morgan Chase, as well as the investments being retained by JP Morgan Chase.

One Equity Partners' investment professionals are currently located across North America, South America and Europe, with offices in New York and Chicago, IL, as well as advisory offices in Frankfurt and São Paulo. Historically, its investments have generally ranged from $50 million to $250 million per transaction.

The transaction is not expected to have a material impact on JP Morgan Chase's earnings, it said.

For the second quarter of 2014 JP Morgan reported that private equity logged net income of $7 million, compared with net income of $212 million in the prior year. Net revenue was $36 million, compared with $410 million in the prior year, which the firm said was primarily due to lower net valuation gains on privately-held investments. 

Background

In June last year, JP Morgan Chase announced that its private investment arm will raise its next fund from an external group of limited partners, as it becomes independent from the New York-listed firm. According to a Reuters report at the time, a source close to the bank said that One Equity Partners was not “core” to JP Morgan’s business and that the move was designed to simplify its operating structure.

“The time is right for them to seek new capital to strengthen their global strategy, as they continue to manage our existing portfolio to maximize value to the firm,” said Matt Zames, chief operating officer at JP Morgan.

Then in March 2014 the spinoff  “hit an impasse,” Reuters reported (see here).

Lexington Partners is a global alternative investment manager primarily involved in providing liquidity to owners of private equity and in making co-investments alongside private equity sponsors. The firm has offices in New York, Boston, MA, London and Hong Kong.

AlpInvest is a global private equity investor with $52 billion of assets under management as of March 31, 2014. AlpInvest's activities cover a range of private equity investing, including primary fund commitments, secondary purchases and co-investments.

Meanwhile, in other news, Bloomberg reported that JP Morgan is considering moving its headquarters within New York "as the company has fewer employees in the nation’s largest city," according to an individual briefed on the discussions. The potential plans are however in early stages and "no decision is imminent." JP Morgan has moved back-office jobs to New Jersey, Delaware and Florida to cut expenses, the person reportedly said.