Providing Feedback to Colleagues

I have recently moved to a new department as one of the two deputy heads. My colleague/peer, the other deputy head, has been a long term staff member within this department.  Unfortunately he was given the role with limited support/mentoring and was forced to act as the temporary head of the department for a number of years. As a consequence he developed somewhat of a siege mentality and I'd describe his management style as one of borderline authoritarian/ micromanager.  I have found him to be personable and I don't believe he is aware of the impact of his actions on his teams. 

After only two weeks in my new role, I have been approached by one of his direct reports requesting to move his entire team under me. While its a great ego boost to have people wanting to join my teams, I believe it would be personally devastating for my colleague and bad for the organisation.

 I have discussed the situation with our joint boss, who in turn is somewhat inexperienced as a departmental head and by nature a conflict adverse person.   Our boss has only been in the role for less than 12 months and while he agrees that my colleague is an ongoing problem, he is not sure what to do.  He claims to have tried to raise this with my colleague but I believe that he was too subtle and didn't really confront the issue properly.  I have also consulted my colleague's previous supervisor who indicated that my colleague became extremely defensive when confronted with staff issues some 2 years ago.  I've also learned that this confrontation came out of the blue and there had not been any feedback provided prior to this or any follow up since. 

The team leader requesting the transfer is very important to the department and is a rising star so not a person we wish to lose. Not acting on the situation is not an option. My conundrum is how to I pacify the team leader,  deny his request and maintain a productive relationship with him and his team.   The only solution I have thought of so far is to discuss the situation with my colleague directly - my concern here is that in even broaching the subject  about his management style it is likely to damage our working relationship.

Have any other managers experienced something similar and can offer advice? I am aware of the feedback model but a casual comment or point of feedback is unlikely to be enough and I am conscious I'm not his boss.  I have managed to get him booked onto a Manager tools  course but it is a number of months off. I feel as If I need to take some more immediate direct action but I'm unsure what form that should be.  Open to any and all suggestions.