Allco Equity goes independent

Allco Equity Partners has terminated its management agreement with its struggling parent company, a move being disputed in court. Meanwhile, fellow Australian buyout firm Hastings is reportedly planning to separate from its parent, too.

Allco Equity Partners has terminated its management agreement with alternative investment firm Allco Finance Group. The parent company has a 35 percent stake in the private equity business.

The move was made because Allco Finance Group went into receivership, said Robert Moran, CEO of Allco Equity Partners, in an interview. However, this does not affect any of Allco Equity Partners’ portfolio companies, Moran added.

The receivers now own the stake earlier held by Allco Finance Group and they have disputed the validity of Allco Equity's spin-out. As a result, the private equity firm has commenced legal action against them and is seeking an urgent declaration from New South Wales Supreme Court that the termination is valid. This is to facilitate a clean and orderly separation from Allco Finance Group, the firm said.

Earlier this month, receivers were appointed for Allco Finance Group when its talks with 12 banks on the repayment schedule for debts of A$667 million ($429 million; €344 million) fell through.

Last year, Allco Equity Partners partnered with global bank Macquarie, buyout giant TPG and Canada investment firm Onex, in an A$11.1 billion bid for Australian airline Qantas. However, the bid failed as it was unable to secure the 50 percent shareholder acceptance.

Allco Equity Partners currently has an investment team of seven. Its investments include a 30.6 percent interest in IT company IBA Health, a 96 percent stake in electronic services company Signature Security Group and a 50 percent interest in receivables management specialist Baycorp.

Separately, Hastings Private Equity is planning a management buyout from Australian bank Westpac, according to the Financial Review. The new manager will be named Mainridge Capital. The firm will also reportedly raise a fund of at least $150 million by the second quarter of 2009.

Hastings declined to comment.