Scaramucci scores millions from a buyer with mystery investors

Washington

A FEW days after Anthony Scaramucci lined up a top job in Donald Trump's White House, he struck a multimillion-dollar deal to exit his investment firm, selling part of his interest to a little-known company, RON Transatlantic.

Mr Scaramucci, the organiser of a popular hedge fund conference, said on Friday in an interview that he doesn't know the identity of RON's investors and relied, as is customary, on RON's managers to vet them. A RON spokesman declined to name the investors, and their identities haven't been disclosed to Mr Scaramucci's SkyBridge Capital, according to a representative of the firm.

Mr Scaramucci is getting a head-turning price compared with similar transactions, analysts say. RON teamed up with another buyer, a subsidiary of Chinese conglomerate HNA Group Co, to buy most of SkyBridge in a deal that values the asset manager at US$180 million or more depending on performance, according to people with knowledge of the matter who asked not to be identified because they weren't authorised to discuss terms. Mr Scaramucci said the price is fair and that he turned down higher offers.

Securities disclosures and corporate reports identify the man behind at least some of RON's holdings: Danilo Diazgranados Manglano, a 52-year-old Venezuelan-born banker known for close ties to the administration of that country's late president, Hugo Chavez. As of last year, Mr Diazgranados owned as much as 10 per cent of SkyBridge through a RON investment vehicle formed in the English Channel island of Jersey, one securities filing shows.

Mr Diazgranados isn't part of the current buyer group and already has shed his stake in SkyBridge, his lawyer, Gregory Craig, said in an interview. He declined to comment further on the transaction.

Richard Painter, who served as an ethics lawyer under former President George W Bush, said a transaction like the one Mr Scaramucci is pursuing calls for more public disclosure and a close look by the White House. "Here, we've got foreign money, and we don't even know who it is," said Mr Painter, now a professor at the University of Minnesota.

Mr Scaramucci has filed all of the ethics disclosures required for his White House role and has agreed to recuse himself from any matter that pertains to his SkyBridge interest, said Elliot Berke, a lawyer for Mr Scaramucci.

"They bought SkyBridge in spite of, not because of, my affiliation with the administration, because they both recognise that I would personally recuse myself from any and all activities in terms of my relationship with the administration," Mr Scaramucci said. A spokesman for HNA declined to comment.

A gregarious Long Island native widely known as "The Mooch," Mr Scaramucci was a prominent Trump fundraiser during last year's presidential campaign and a frequent presence at Trump Tower during the transition period.

On Jan 12, Bloomberg reported that he was given a top White House role as an assistant to Mr Trump. Mr Scaramucci, who later said his title is director in the office of public liaison, has already started work at the White House, although he doesn't formally join the staff until Feb 6, according to a person with knowledge of the matter.

As news of his appointment broke, Mr Scaramucci was wrapping up negotiations for the sale of his approximately 45 per cent stake in New York-based SkyBridge, which he founded in 2005. The business manages funds of funds, gathering money from clients and entrusting it to outside hedge funds. On Jan 17, SkyBridge announced the agreement to sell a majority stake to HNA and RON without disclosing terms. The sale includes all of Mr Scaramucci's interest.

HNA, based in Haikou City, China, is slated to get a majority stake in the company, according to people with knowledge of the transaction. These people said RON's share is at least 20 per cent, and that remaining SkyBridge executives would own the balance. Mr Scaramucci has already relinquished his role at the company.

The valuation of SkyBridge could climb to as much as US$230 million if certain performance targets are met, said people with knowledge of the matter. The basis for Mr Scaramucci's payout is fixed at the US$180 million valuation, they said. The deal is scheduled to close in about three months, the people said.

The transaction values SkyBridge at 7.2 times normalised Ebitda, or earnings before interest, taxes, depreciation and amortisation, Mr Scaramucci said.

"That's a rich valuation for a fund-of-funds transaction," said Karl D'Cunha, managing director at CBIZ Valuation Group in Chicago, who said buyers typically pay three to five times earnings.

Six other investment bankers, consultants and managers of similar funds also said the valuation was high for a fund-of-funds manager, particularly one that's seen client withdrawals. SkyBridge's assets have fallen after two years of performance that lagged behind peers. The firm had US$13.6 billion under management and advisement in July 2015. As of Nov 30, 2016, the amount had dropped to US$12 billion.

Mr Scaramucci said he held a competitive auction and chose a lower bid from HNA and RON because they offered to protect his partners, employees and investors.

Mr Scaramucci said the company has a uniquely valuable feature: a distribution system that taps 41,000 mostly "mass affluent" clients and gives them access to hedge fund investments that would otherwise be out of reach. "Every dentist in America can have a US$25,000 to US$50,000 hedge fund portfolio, run by the best and brightest hedge fund managers in the world - hedge funds that typically have US$15 to US$25 million minimums," he said in a Jan 12 interview in Trump Tower.

Last year, RON said on its website that it was based in Washington, had offices in Madrid, Mexico City and New York and managed more than US$8 billion in investments in energy, telecommunications and finance. That information is no longer on the website.

The top executive there, Lorenzo Roccia, was born in New York and grew up in Venezuela before returning to the US, according to a 2008 profile in a Venezuelan media outlet. He has helped raise funds for several Democratic presidential campaigns, the profile said. Reginald Love, a personal aide - or "body man" - to former President Barack Obama, is a partner in RON's Washington office, according to his LinkedIn account.

"I've known the principal, Lorenzo Roccia, for 20 years," Mr Scaramucci said. "I hold him in the highest regard. He is a man of impeccable character and he has an impeccable reputation." Mr Roccia said in a telephone interview that the investors in the SkyBridge deal are family offices and institutions, but he declined to name them.

Documents filed in Jersey last year show that the RON entity that held the SkyBridge stake, known as RON Transatlantic Offshore Ltd, was 85 per cent owned by a British Virgin Islands company that was in turn controlled by Mr Diazgranados. Another Jersey company, RON Transatlantic Brewery Services Ltd, was 82 per cent owned by the Diazgranados vehicle. WP