When Electra Investment Trust rejected a hostile bid from UK-listed rival 3i back in 1999, it kept shareholders on board with the promise of juicy cash returns that it would generate by focusing its efforts on realisations rather than new deals. Seven years on, the firm has been so successful at delivering on its promise that it is now hoping to gain approval to re-establish a fully fledged investment strategy.
The scale of Electra's distribution bonanza is striking. Since 1999 it has sold 68 businesses for a total of £2.1 billion (€3.1 billion; $4 billion), returning £1.2 billion in cash to shareholders through tender offers and on-market share buy-backs. After many years of relatively average share price performance pre-1999, the firm's net asset value (NAV) has since increased 89 percent, compared with a rise in the FTSE All Share Index of just 1 percent over the same period.
By now sufficiently emboldened, the renamed Electra Private Equity earlier this year hired Lazard to conduct a strategic review. On 12 October, shareholders will vote on the key recommendation of that review: a revived commitment to Western European (and especially UK) private equity in the form of direct and secondary investments. The firm says it is aiming to deliver a return on equity of between 10 and 15 percent per annum over the long term.
If the vote goes its way, Electra Private Equity will be hoping that the environment for new deals is as benign in the foreseeable future as it has been for exits over the last seven years. Sceptics might point out that a cashed-up Electra will only add yet more liquidity to an already highly competitive mid-market.
At least the firm will now be able to avoid name-related confusion as it steps up its activities. In a newsworthy month for private equity firms named Electra, Electra Partners Europe – led by a management team that went its own way after the 1999 defence – has just re-branded itself Cognetas.
ARGUS CAPITAL PARTNERS PASSES TARGET FOR FUND II
Argus Capital Partners, a Central and Eastern European private equity firm, has raised €213 million ($270 million) to date for its second fund. Ali Artunkal, London-based managing partner of Argus Capital Partners, said that Argus Capital Partners II has already exceeded its original target of €200 million and was confident the fund will reach its hard cap of €250 million. Artunkal said that, given the development of Central and Eastern Europe, “there is now a much more mature private equity market in the region and so we will be more focused on buyouts than early or later stage investments”.
HBOS CUTS BACK SMALLER MANAGERS
HBoS, one of the UK's largest banks and a big investor in private equity, is cutting back the number of relationships it has with private equity managers in its £2 billion ($3.8 billion; €2.96 billion) portfolio. A source close to the bank said it had relationships with about 55 private equity firms active across the buyout spectrum, reflecting its former interest in underwriting loans for buyouts, from as little as £10m and up to £1bn. That range has now narrowed to start at around £250 million.
ALCHEMY NEAR FIRST CLOSE FOR DISTRESSED FUND
Alchemy Partners, a UK private equity firm, is nearing a first close of its Alchemy Special Opportunities Fund, which launched at the end of May with a target of £250 million (€368 million). Ian Cash, formerly the co-founder of the global special situations group at Mizuho International, joined Alchemy in May to head up the new distressed debt fund. Cash said that the fund, which has a hard cap of £300 million, is likely to raise between £150 million and £170 million for its imminent first close with a final close expected by year end (see p. 89).
DOUGHTY HANSON TO RAISE €1BN LISTED FUND
Doughty Hanson, a London-based private equity firm, has hired Citigroup and Goldman Sachs to raise more than €1 billion ($1.27 billion) through listing a buyout fund on Amsterdam Euronext. US private equity firms Kohlberg Kravis Roberts and Apollo Management also listed funds recently with the help of Citigroup and Goldman Sachs. KKR raised $4.8 billion for KKR Private Equity Investors in May and has committed $1.6 billion to the private equity firm's deals and $1.9 billion to its 2006 fund, which is being raised with a target of $15.5 billion, according to results released in August. Apollo Management's AP Alternative Assets raised $2 billion in August, around a third more than expected prior to the listing. Bankers familiar with the Apollo listing said its banks worked hard to push Apollo past its target.
PARTNERS GROUP LAUNCHES €400M AIM VEHICLE
Partners Group, a Swiss alternative assets fund of funds manager, has launched a €400 million ($508 million) publicly listed fund. A spokesperson for Partners Group said that Partners Group Global Opportunities Limited will list on AIM, with Credit Suisse, Merrill Lynch and Bear Stearns managing the listing. A source close to the firm said that a hard cap of approximately €750 million has been set. The fund, which will also trade on the Channel Islands Stock Exchange, will invest in private equity and debt investments in Europe, North America and Asia.
CLIMATE CHANGE IN $830M FIRST CLOSE
Climate Change Capital, a UK investment banking group dedicated to investment in clean energy and a low carbon economy, is on target to raise more than $1 billion for the world's largest private sector carbon fund. It has already raised $830 million in only three months. Investors include ABP and PGGM, two of the world's top five pension funds, Centrica, a UK-based international energy group, and a global emerging markets banking group. The money raised will be invested in projects principally in developing countries that will lead to dramatic reductions in the amount of greenhouse gases, and specifically carbon, being emitted into the atmosphere.
HUTTON COLLINS CLOSES SECOND FUND ON €570M
Hutton Collins, a mezzanine and preferred equity provider, has closed its second fund on €570 million, double the amount raised for its 2004 predecessor. The fund closed in April after six months in the market, but according to Graham Hutton, one of two founding partners, the firm decided to keep it low profile. Around 20 investors have made commitments to the new fund, drawn by realisations to date from the first fund, which is showing an internal rate of return of more than 30 percent and will return more than two times money. Hutton said it would probably hit 40 percent by the time it is fully realised.
EUROPEAN CAPITAL INCREASES CREDIT FACILITY
European Capital, a buyout and mezzanine provider, has increased its multi-currency revolving credit facility from €400 million to €900 million ($514 million to $1.15 billion). Wachovia Securities was lead arranger and bookrunner on the credit facility, which is denominated in euros, pound sterling and dollars. Wachovia Bank, Bank of Montreal, Citibank, Alpine Securitization, JP Morgan Chase and Chariot Funding provided commitments for the credit facility. Simon Henderson, managing director in European Capital's London office, said earlier this year that the firm planned to raise its credit facility at least to match its inaugural fund, which raised €750 million of equity commitments in October 2005.
GILDE BUY OUT PARTNERS CLOSES THIRD FUND
Gilde Buy Out Partners, a mid-market buyout firm with a focus on the Benelux and the French and German speaking regions, has held a final closing of Gilde Buy Out Fund III with total commitments hitting the original target of €600 million ($768.7 million). Natascha Jacobovits de Szeged, Gilde's investor relations officer, said the fund was oversubscribed but restricted to its hard cap target, 20 percent above its last fund. Gilde received commitments from about 30 institutional investors in a year-long fundraising.