CDC Capital Partners, the UK state-owned risk capital investor, has completed a restructuring that it believes will increase its ability to stimulate private sector growth in the world’s poorer economies. CDC has over £1 billion (€1.4 billion; $1.8 billion) in assets.
Under the deal, CDC is split into two separate vehicles. The group’s investment professionals and staff are spinning out to form Actis, a limited liability partnership in charge of managing CDC’s investments as well as up to $500 million of additional capital to be raised from third party institutions over the coming years.
Actis’ management are acquiring 60 percent of the entity’s equity for a consideration of £400,000. The remaining 40 per cent of Actis’ shares are retained by the UK Government. Paul Fletcher, currently CEO of CDC Group, will run the business. KPMG acted as valuation advisers on the transaction.
CDC will retain its name and continue to operate as a wholly government-owned investment company, holding the existing and future assets of CDC and funds affiliated with the group. Richard Laing, CDC’s finance director, will be in charge of the investment company.
“This represents a major innovation in the field of development finance,” said Laing on the significance of the transaction. “It is our aim to see that the private sector businesses we invest in grow in a socially responsible manner, with proper concern for corporate governance and the public interest, while ensuring that British taxpayers’ funds are invested wisely.”
Actis will receive management fees for running CDC’s assets for five years, after which CDC will decide, based on Actis’ performance, whether to continue to work with the group or whether to appoint other investment managers instead.
Actis will initially concentrate on investing in Africa and South Asia. A preferred sector is power, where the group invests through its emerging markets power business CDC Globeleq. It will also continue to be active as an investor in small and medium-sized enterprises. CDC already operates Aureos Capital, a joint venture with Norwegian development agency Norfund, which invests in African SMEs. Aureos already manages some $50 million in third party capital.
The Department for International Development, the government body that controls CDC, was advised on the reorganisation by Campbell Lutyens, the London-based private equity strategic advisory and fund placement group.