Permira cashes in Galaxy chips

The European firm has generated a 2.2x return after selling part of its stake in Galaxy Entertainment Group. It retains a sizeable stake in the casino and hotel operator, its first Asian investment.

Private equity firm Permira has sold 34 percent of its holding in Galaxy Entertainment Group in a deal worth HK$4.78 billion (€429.9 million; $613.9 million), generating a 2.2x return, an industry source told PE Asia.

Through an institutional placement on the Hong Kong Stock Exchange, Permira has sold 270 million Galaxy shares at HK$17.7 each, according to a statement. Galaxy shares were trading at HK$17.48 per share at press time, down 6.32 percent from yesterday’s closing price of HK$18.66.

Following the transaction, Permira still owns 528 million Galaxy shares which represent a 12.8 percent stake in the company. The firm has no immediate plan to dispose its remaining holding, the statement noted.

“Galaxy Entertainment Group has been a very successful investment for the Permira funds to date and we believe there remains very attractive long-term growth potential for Macau and the company. We are confident of further appreciation in the value of the company and the investment,” the firm said in the statement.

In November 2007, the European firm paid €593 million for a 20 percent stake in the Macau-based casino and hotel operator. The transaction marked Permira’s maiden deal in Asia since its opening of the Tokyo office in 2005.

In addition to providing the capital Galaxy needed at the time, Permira worked with the company to manage its budget and cash flow closely during the financial crisis, the source said. Galaxy share price has continued to climb to as high as HK$22.2 each earlier last month from HK$0.52 recorded in late 2008.

In its interim results published on 31 August, Galaxy reported an adjusted EBITDA of HK$1.8 billion in the first half of 2011, up 84 percent year-on-year. The company has been one of Permira's top-performing investments

The year of 2011 also looks good for Permira in Asia thus far. The partial exit of Galaxy came after the appointments of Henry Chen and Alex Emery as Asia co-heads and former Goldman Sachs banker Alan Chen as head of China earlier this year.