Oakley reaps 150% IRR on online dating stake

Oakley has agreed to offload half its stake in online dating service PARSHIP ELITE to German media conglomerate ProSieben Sat. 1 Media.

Online dating has proven to be an ideal match for Bermuda-based Oakley Capital Investments Limited (OCL).

AIM-listed OCL provides permanent capital for funds managed by London-based Oakley Capital Private Equity, a private equity investor which manages more than €750 million in assets, and targets mid-market businesses located primarily in Western Europe.

OCL said Monday that Oakley’s second mid-market fund, Oakley Capital Private Equity II – in which OCL holds a 38.1 percent stake – has agreed to sell a majority stake in PARSHIP ELITE, a Hamburg-based online dating service catering to German speakers, to German media conglomerate ProSieben Sat. 1 Media (P7S1).

The deal to sell its majority stake in PARSHIP will generate a cash return of 2.3x, a money multiple of 3.6x, and an internal rate of return of about 150 percent, OCL said Monday.

Rebecca Gibson, a partner at Oakley Capital, said that the firm’s interest in PARSHIP stems from its expertise in the digital consumer space, a key “sector hub” where the firm has a strong track record and can add value.

“We look for big brands, analytically-led businesses with a high level of customer awareness, where we can work with the founders to help them grow the company,” Gibson said.

PARSHIP, which bills itself “Germany’s biggest matchmaker”, is growing rapidly, with 28,000 new singles registering on the site every week, the company said. Fund II acquired PARSHIP just 16 months ago, and rapidly expanded the business by acquiring a competitor, German online dating agency Elite Partner, six weeks later.

“This was a very logical combination: both companies had been competing fiercely, and recognised the value in merging,” Gibson said, noting that management and Oakley had a “clear integration plan” for the two former rivals, which was implemented in a series of stages.

Fund II will receive gross proceeds of €129 million from the sale, and together with PARSHIP’s existing management, is retaining a minority stake of just under 50 percent in the business “to benefit from further growth and the value of ProSiebenSat.1 ownership,” OCL said in a statement.

The deal gives PARSHIP an enterprise value of €300 million, and values OCL’s indirect economic interest in the group at €67 million, including expected net cash returns of about €44 million. The £5.2 million in debt OCL provided to PARSHIP will also be repaid, OCL said.

Last month Private Equity International reported that Oakley Capital held a first close on its third private equity fund, gathering more than €500 million. Oakley Capital Private Equity III launched earlier this year with a hard-cap of €750 million, and was seeded with a €250 million commitment from OCL, PEI reported.

As a result of the sale, OCL said it expects an uplift of £25 million (€30 million; $33 million), or 77 percent over OCL’s carrying value reported on 31 December 2015. This is equivalent to a 9.4 pence per share (€0.11 a share) increase to the interim net asset value range of 212p to 215p announced in OCL’s 4 August 2016 trading update, which implies an adjusted NAV of about 223p, analyst Charles Cade of Numis Securities said in a research note.

OCL’s share price rose 4.5p to 142.50p in morning trading, “but this still represents a discount to NAV” of about 36 percent, Cade noted.

PARSHIP isn't the first company P7S1 has bought from Oakley. Last June, P7S1 bought German online price comparison business Verivox from Oakley's first fund, Oakley Capital Private Equity, for an initial cash consideration of €200 million, with a further consideration of up to €50 million if the company met certain financial performance criteria in the year to 31 December 2015.

That transaction was expected to generate a 15x gross money multiple for Fund I, and an IRR of 73% if the company were valued at €200 million; the multiple and the IRR rose to 19x and 76% if the full earnout were paid, Oakley said at the time.

Updated with quotes from Oakley Capital partner Rebecca Gibson and details about the sale of Verivox to P7S1.