DBAG raises €38.6m for co-investment

The German listed firm has raised the funds through a share placement to invest alongside its recently-closed Fund VII, said CFO Susanne Zeidler.

Deutsche Beteiligungs AG – the listed German private equity firm otherwise known as DBAG – has raised €38.6 million for co-investments through the placement of almost 1.4 million new shares on the Deutsche Börse, according to a statement.

The capital raised will be used for co-investment alongside DBAG’s closed-ended private equity funds, particularly DBAG Fund VII, a €1 billion pool of capital comprising two parallel funds: the €800 million “principal” fund and a €200 million “top-up” vehicle.

The principal fund, €183 million of which is coming from DBAG’s balance sheet, is restricted on the amount of capital it can commit to any one deal. If DBAG sources a deal that requires an equity commitment of more than around €80 million – outside of the remit of its main fund – it can call on capital from the top-up fund, as reported by Private Equity International.

Fund VII has an investment period of six years rather than the traditional five. Both the principal and the top-up fund have an 8 percent hurdle rate and 20 percent carried interest rate, as reported by PEI.

DBAG said it wants to co-invest up to €200 million from its balance sheet alongside this fund, a 50 percent increase on the €133 million the firm committed in 2012 to DBAG Fund VI.

“This capital increase is a consistent implementation of our financing strategy – Deutsche Beteiligungs AG finances its activities in the long term exclusively by way of the stock market; the line of credit secured at the beginning of the year is only intended to serve short-term liquidity requirements in exceptional cases,” Susanne Zeidler, DBAG’s chief financial officer, said in the statement.

The shares were acquired by both existing major shareholders and institutional investors previously invested in DBAG. There was particularly high demand from institutional investors in Germany, the UK and the US.

“Following registration of the new shares, DBAG’s shareholder profile will shift towards a greater proportion of institutional investors,” the firm said.

Last month PEI reported that a drop in stock market valuations took an €11.7 million hit on DBAG’s portfolio in the three months to 30 June. In an update the firm said the public peer group it uses to value its portfolio was valued at “a significantly lower level” than three months previously, due to the outcome of the Brexit referendum. This dragged down the valuation of the €264 million portfolio by €12.7 million. Around half of the valuation drop was offset by growth within the portfolio, leading to a net contraction of €5.7 million in the quarter.

However, the firm said these short-term changes are “of little significance for DBAG’s long-term performance and the quality of the portfolio”, and that the portfolio is “well poised”. Net asset value per share had increased by €0.93 since last October to €23.09 at the end of June.

Baader Bank AG was the sole bookrunner for the share placement. Lilja & Co. and Allen & Overy advised DBAG in preparing and transacting the capital increase, while Hogan Lovells International acted as counsel to Baader Bank.