Holding company gives up some of Westfield's upside to retain key personnel. Boston Private Financial Holdings (BPFH) is dividing the equity of its affiliate Westfield Capital Management into two classes. One class will ensure that Boston Private retains all of Westfield's pre-tax profits up to around $30 million. The other class, which gives holders any profits in excess of $30 million, will be split with two thirds going to Westfield's management team and the rest to BPFH.

"By granting Westfield's management team a direct participation in the future value they create, we have strengthened their entrepreneurial culture and more closely aligned their interests with those of our shareholders," says BPFH's chairman and CEO Timothy Vaill. "I could not be more pleased that as part of this restructuring, the first-class team of senior professionals at Westfield has re-affirmed its long-term commitment to the business."

Give and take

Translation: BPFH has taken steps to ensure that guiding lights of one of its more profitable affiliates stay put, but it has given up some of the firm's potential growth to do so.

BPFH's stock, which has shed nearly two thirds of its value this year, is trading at levels it hasn't seen since mid-year 2000.

Members of Westfield's management team who receive shares of the new class of equity must enter into agreements that restrict post-employment competition and solicitation of clients and employees.

The restructuring means that Boston Private will have to pay "a one-time, non-cash, non-tax-deductible compensation charge," which is dependent on, among other things, Westfield's assets under management when the deal closes within the next few months. Had the deal closed at the end of February 2008, this charge would have come to between $40 million and $45 million, according to BPFH.

William Muggia, Westfield's president and CIO, will become the firm's CEO in April, replacing Arthur Bauernfeind, who will continue in his duties as chairman.

"With this transaction, and in conjunction with our partnership with [BPFH], we have strengthened our competitive position and enhanced the stability of our leadership team by putting a meaningful equity stake in the hands of our key people -- a characteristic we have consistently observed among our most respected competitors," says Muggia.

Westfield, a growth manager, was founded in 1989. BPFH acquired it in 1997 for $31.8 million. It now manages more than $13 billion in assets for individual, high-net-worth and institutional investors. -FWR

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