Coller buys into Lucent venture portfolio

Coller Capital, the London-based acquirer of second-hand private equity portfolios, has bought an 80 per cent stake in the venture capital portfolio of Lucent Technology, the US networking concern.

Lucent and Coller unveiled today a new venture capital partnership called New Venture Partners II (NVP II), which will own and manage the Lucent New Ventures Group (NVG) portfolio of businesses, a spin-off of Lucent’s research & development division, Bell Labs.

No details relating to pricing have been published. A source familiar with the situation said that the transaction was small enough for Lucent not to have to disclose the price that it and Coller Capital had agreed.

Under the terms of the deal, NVG’s management team will leave Lucent and move to NVP II to run the portfolio as an independent company. Lucent will retain a 20 per cent limited partner interest in the new venture.

The NVP II portfolio comprises 27 technology companies encompassing software, storage and communications. According to Jeremy Coller, founder and chief executive of Coller Capital, NVG was the first high-quality portfolio of technology stocks that has come up for sale since the market has slumped.

“Over the past 18 months, we have analysed more than 100 opportunities to buy into private equity portfolios, but walked away from them all”, Coller said. 'There is a time to invest, a time to sell and a time to do nothing. The latter is probably the hardest.'

NVP II was the opportunity the firm had been waiting for, he added: 'These companies give us a good spread of risks. They also serve a wide variety of customers in different countries and several of them are mature businesses with substantial revenues.”

Lucent decided to scale back its in-house corporate venture activities because, according to Bill O’Shea, president of Bell Labs, having an independent company manage the NVG portfolio companies would better position them to develop further whilst allowing Lucent to concentrate on core business.

Lucent is one of the world's leading technology groups that have been hard hit by the global economic downturn and keen to focus on their main businesses. Jeremy Coller confirmed that this time a year ago todays deal would not have happened: 'It's a sale in a new paradigm', he said.

Commenting on the reasons for doing the deal with Coller Capital, O’Shea said: “They responded quickly and clearly understood how to align the interests of Lucent, Coller Capital and the NVG management team.” An ongoing carried interest arrangment has been negotiated with NVG's management.

Coller Capital was set up in 1990. It's latest deal was completed two years ago, the $1bn purchase of the National Westminster Bank portfolio, which remains the largest secondary transaction to date.

The Lucent deal marks the final investment for Coller's third fund. The firm is currently raising its fourth fund for investment in the secondaries market with a $1bn target.