British bank Abbey National has continued its disposal of non-core assets with the £300 million ($550 million; €430 million) sale of much of its private equity portfolio to secondaries specialist Coller Capital.
Timothy Jones, a partner at Coller Capital, claimed in an interview that the transaction was the largest private equity secondary transaction to date involving a single buyer. It comprises interests in 41 private equity funds and direct shareholdings in 16 private European companies, which will be transferred to Coller’s $2.6bn global secondaries fund, Coller International Partners IV.
Jones said the portfolio included positions in funds managed by 3i, BC Partners, Duke Street Capital, Intermediate Capital Group, Montagu Private Equity and Warburg Pincus. He also said that it did not include Abbey National’s €115 million commitment to mezzanine firm Hutton Collins’ debut mezzanine fund, which it made in May 2002.
Abbey declined to comment on its plans for the investment in Hutton Collins. A call to Hutton Collins was not returned.
Abbey began investing in private equity in the late 1990s, subsequently suffering from the market downturn and seeing the book value of its investments shrink. The bank’s original commitment to the funds involved was £748 million, of which £162 million represented undrawn funding commitments as at 31 December 2003.
Commenting on the quality of the assets acquired, Jones said: “The portfolio includes some good names but Abbey invested at a point in the market when things were quite bullish and then all private equity portfolios lost value in line with the public equity markets. We believe we have bought at a fair price and at a reasonable point in the cycle.”
Anna Merrick, director of special finance at Abbey, said in a statement: “This is a fair deal for Abbey, at a price in line with our expectations, and is another step in disposing of assets that are no longer core to our strategy.”
In February 2003, Abbey announced a strategy of focusing solely on providing personal financial services in the UK. The team that built Abbey’s portfolio was dissolved.
In September 2003, mid-market private equity firm Electra Partners Europe announced that private equity investors HarbourVest Partners and the Third Swedish National Pension Fund (AP3) had acquired Abbey’s holding in Electra’s €1bn European Fund.
Coller's purchase of the Abbey portfolio is subject to the approval of the funds’ general partners, which Jones said is anticipated within the next three to four months. The purchase consideration comprises cash plus a secured £165 million loan note.
Coller raised the first ever European secondaries fund in 1994 and closed its fourth fund, Coller International Partners IV, last October on $2.6 billion, making it the largest global secondaries fund ever raised. Major Coller transactions since 1998 involve portfolios previously owned by Shell US Pension Trust, NatWest Bank, Lucent Technologies’ Bell Labs, British Telecom and Deutsche Bank.