HarbourVest closes in on Absolute after activists capitulate

HarbourVest Partners is poised to grow its AUM with the $806m acquisition of listed Swiss peer Absolute Private Equity.

HarbourVest Partners is nearing the finishing line in its laborious battle to acquire Switzerland-listed fund of funds manager Absolute Private Equity (APE), after more than 90 percent of the company’s shareholders tendered their stock. The deal will boost HarbourVest's assets under management, a measure other funds of funds groups are thought to be considering via various consolidation plays. 

Under Swiss law, HarbourVest can initiate a compulsory squeeze-out of APE's remaining shareholders once the offer is declared successful and the results confirmed. This is expected to occur next Tuesday, according to a source close to the process.

The 90.4 percent stake includes shares from activist shareholders who had earlier attempted to foil the HarbourVest bid, according to the source. HarbourVest is understood to be confident it will obtain 100 percent approval for its bid.

There are a lot of unknowns in a deal like this … it is not easy to do.

John Toomey, HarbourVest

HarbourVest has had a number of hurdles to surmount in its attempt to acquire APE, with activist shareholders in particular proving a thorn in its side. John Toomey, a managing director at HarbourVest, told Private Equity International: “There are a lot of unknowns in a process like this, and this type of deal is not easy to do. Having been  introduced to the opportunity by the company's adivsors, we determined the portfolio was attractive. We were also one of the few groups able to consummate a deal of this nature.”

HarbourVest launched an offer of $17.25 per share, worth up to $752 million, for APE on 26 April.

HarbourVest then increased its bid to $18.50 a share on 14 July, valuing APE at $806 million. That increase was reportedly in response to an attempt by Swiss asset management group Alpine Select to acquire Credit Suisse’s 20 percent shareholding, thereby foiling HarbourVest’s takeover bid.

The initial offer period, from 23 June to 20 July, was first extended to 21 July, and then later to 26 July in response to disclosures required by the Swiss Takeover Board with regard to a break fee agreed between the parties. 

John Toomey

Further complications arose when a rival offer emerged in late July. ACP Intermediate Acquisition, a bid vehicle formed by US investor and existing APE shareholder David Abrams, launched an offer of $18.60 a share for 19.32 percent of APE’s stock. The HarbourVest offer deadline was extended yet again, to 3 August, while the Swiss Takeover Board considered the legality of ACP’s bid, and whether it constituted a formal counter-offer to HarbourVest’s proposal.

The Swiss regulator then ruled ACP’s bid did not constitute a competing offer, before ACP withdrew its bid earlier this week.

HarbourVest revealed in a statement issued Thursday that preliminary results showed it had 90.425 percent acceptance of its bid. The remaining shareholders who have yet to tender their shares have until 30 August to do so, with the deal likely to complete by 13 September.

Debevoise & Plimpton and Swiss firm Pestalozzi advised HarbourVest on its bid, while Credit Suisse and local law firm Niederer Kraft & Frey advised APE.

The listed private equity market is undergoing a period of upheaval at present. Activists such as Mantra Investissement have been lobbying listed fund of funds groups including Private Equity Holding to reduce the substantial discounts to net asset value that have afflicted many listed private equity managers and enhance shareholder value.

For more detailed analysis of the listed private equity market, read the September issue of Private Equity International.