BLACKSTONE'S WHITE FLAG

The Blackstone Group has admitted defeat in its £100 million (€148 million; $198 million) fight with Iranian property tycoon Robert Tchenguiz to take over UK tapas chain La Tasca.

Tragus, the portfolio company owned by Blackstone, decided not to increase its 192 pence per share offer for the tapas chain, and is instead seeking to sell “some or all” of its 6.88 percent stake in the business. La Tasca's board, which recommended Blackstone's bid before switching allegiance to Tchenguiz's 200 pence per share proposition, will now have to pay Blackstone a break fee of £1 million.

Blackstone bought restaurant chain owner Tragus from UK private equity firm Legal & General Ventures in December 2006 for £267 million. The firm originally offered 185 pence per share for La Tasca but increased this to 192 pence after Tchenguiz came to the table with 188 pence. Tchenguiz then upped his stake in La Tasca more than 20 percent to trump Blackstone's offer for a second time

How serious is the threat that property entrepreneurs like Tchenguiz present to private equity firms? Says one UK analyst: “Wealthy individuals like Tchenguiz offer a totally different package from buyout firms. From the perspective of the business that has put itself up for sale, individual entrepreneurs do not threaten to make changes to the management team like buyout firms do.”

The analyst adds: “The recent criticism that private equity has received may also have affected its perceived attractiveness in the minds of businesses like La Tasca.”

While the idea of private equity firms being trumped by their peers has become an accepted fact of life in the auction process, the ‘Tchenguiz factor’ is more of an emerging threat. Should Blackstone's La Tasca defeat become indicative of a wider trend, it would present another edge to increasingly competitive sales.

DOLPHIN CAPITAL MAKES CYPRIAN INVESTMENT
Dolphin Capital Investors, a Fortress-backed private equity firm that invests in Europe's Southeast, has bought an 80 percent stake in Aristo Developers, the biggest developer of holiday homes in Cyprus. Dolphin has invested €438 million ($570 million) in the stake, acquiring 60 percent from founder Theodoris Arisdimou, and the other 20 percent from the second largest shareholder. Dolphin was founded in 2005, and is one of the biggest companies listed on London's alternative investment market, with a market capitalisation of £467 million.

SAINSBURY'S BEYOND PRIVATE EQUITY'S REACH
The efforts of a private equity consortium to acquire listed UK supermarket chain Sainsbury's have foundered in the face of opposition from the founding Sainsbury family. A consortium initially comprising CVC Capital Partners, Blackstone Group, TPG and KKR raised an initial 562 pence per share offer to 582 pence, valuing the company at around £10 billion (€14.7 billion; $19.8 billion). However, Lord Sainsbury of Turville, who owns 7.75 percent of the company, said he would not consider a bid below 600 pence while other members of the family – which owns 18 percent of shares in total – said they would not sell at any price. Aside from the difficulty of winning over minority shareholders, the bid highlighted two other possible obstacles to the completion of UK take-privates. First, the imposition of a “put up or shut up” deadline by the Takeover Panel, which some observers suggested put the consortium under unrealistic time pressure. Second, the existence of a pension fund deficit, for which the trustees wanted a £1 billion payment. The first consortium member to pull out was KKR, which feared that its bid for UK health retailer Alliance Boots would give rise to competition issues (a deal expected to go through at the time of going to press). It was subsequently reported that Blackstone and TPG had withdrawn on price grounds before CVC issued a statement formally terminating the consortium's approach.

ADVENT BUYS FRENCH RETAIL BUSINESS
Advent International has bought Stokomani, a French discount retailer, from Alpha Group for an undisclosed amount. Stokomani generated sales of €83 million ($111 million) in 2006. Alpha originally bought out the business in 2003. Advent's previous investments in the discount retail sector include Poundland and Dollar Express. Advent has offices in 14 countries and has raised $10 billion since inception in 1984. Alpha closed its seventh fund on €750 million in February and has offices in Frankfurt, Paris and Monaco.

SOVEREIGN EXITS CMGL
UK mid-market firm Sovereign Capital has sold CMGL Group, a provider of outsourced claims and insurance management services, to Capital Group for £32 million (€47 million; $63 million). According to Sovereign, the deal has generated an IRR of 260 percent and represents a return of 3.3 times the original investment. Sovereign bought CMGL from Zurich Financial Services in August 2005. The sale is the first exit from Sovereign's second fund, which closed in 2005 on £275 million. Other recent exits include the sale of SENAD Group in July 2006, which achieved an IRR of 110 percent, and which represented a return of six times the original investment.

CVC SELLS ISTA TO CHARTERHOUSE
CVC Capital Partners has realised most of its investment in German metering business ista, having completed a €2.4 billion ($3.2 billion) secondary buyout to UK buyout firm Charterhouse Capital Partners. The business provides energy and water metering services for commercial and domestic customers. CVC bought ista in June 2003 from German utility E.ON, and has since increased sales from €460 million in 2002 to €600 million in 2006. CVC will re-invest some of the proceeds back into the business in a minority stake. CVC has raised more than $18 billion of capital and has invested in more than 220 companies since inception in 1981.

INDUSTRI KAPITAL DELIVERS 10X RETURN
Nordic buyout firm Industri Kapital has generated a return of more than 10 times its initial investment through the sale of Prevsta, a Swedish residential housebuilder, to Norwegian trade rival Block Watne for €204 million ($274 million). Industri Kapital bought the business in March 2005 and is keeping a minority stake in the company. The deal is one of the most successful from the firm's Industri Kapital 2004 Fund, which initially aimed to raise €2.5 billion but eventually closed on €825 million in February 2005 after a difficult fundraising period. The firm is currently raising a new fund and widely expected to exceed its €1.2 billion target.

APAX COMPLETES BOLT-ON FOR TRAVELEX
Apax Partners has completed a bolton acquisition for payment services business Travelex, buying US rival Ruesch International for $440 million (€328 million). Ruesch, which was previously owned by US buyout firm Welsh Carson Anderson & Stowe, is intended to bolster Travelex's US presence and its business-to-business foreign exchange activities. Apax bought Travelex in August 2005 from 3i, and has since sold a minority stake to Standard Chartered, a bank with a large commercial presence in emerging markets. Travelex established a 10-year partnership with money transfer business Western Union in December 2005, and bought 25 branches of Austria-based Reisebank in 2006.

HG COMPLETES HIRSCHMANN EXIT
Hg Capital, a UK mid-market firm, has completed its exit from Hirschmann Group, selling the car communication business to management for an undisclosed amount. The business, which provides navigation devices and antenna systems for cars, generated sales of about €100 million ($130 million) in 2006. Hg sold the bigger part of the business to US electronic cable maker Belden for $260 million in January. Founded in 2000, Hg Capital has €2.5 billion under management. The firm recently bought Americana International, which owns urban streetwear brands Bench and Hooch, for £190 million.

QUADRIGA BUYS GERMAN BUILDING BUSINESS
Frankfurt-based Quadriga Capital has bought Essmann Group, a German building materials supplier, from Taros Capital for €110 million ($150 million). Essmann, which provides lights, fans and smoke alarms for commercial and domestic properties, generated sales of €130 million in 2006. Amsterdam-based Taros, which bought Essmann in 2000, spun out from AlpInvest in October 2005. It has invested more than €450 million in 18 companies since inception. An attempt to raise a new fund for Taros was abandoned last year.

INDEX VENTURES LEADS RUSSIAN MEDIA FINANCING ROUND
Index Ventures and a consortium that includes Russian private equity firm Baring Vostok have invested $18 million (€13 million) in Ozon.ru, Russia's largest internet retailer. Other investors in the financing round include German corporate venturer Holtzbrinck Ventures and computer networking provider Cisco Systems. Index's previous deals in the internet sector include betting exchange Betfair and Lovefilm, Europe's largest DVD rental business. Baring Vostok recently closed a $1 billion fund, the biggest ever raised for investments in the region.

WAITING FOR MEGA DEALSAccording to research compiled by CMBOR in Nottingham, UK private equity had a slow start in the first quarter of 2007. After a record £9.3 billion (€13.6 billion; $18.5 billion) of deals completed in the final quarter of 2006, completions slowed to only £3.4 billion in the first quarter of 2007 – the lowest quarter for three years.Tom Lamb, co-head of Barclays Private Equity, commented: “It is astonishing to see how little private equity activity there has actually been in the first quarter given the frenzy of press coverage surrounding a succession of high profile ‘take-private’ candidates such as Sainsbury's, Alliance Boots, Pearson, Kingfisher, Whitbread, Compass, and Cadbury. However, the slow down in the first quarter is not necessarily a reflection of the year to come, 2005 and 2006 showed a similar drop, both of which turned into record years.”The table shows the largest UK private equity deals in the first quarter of 2007.

Buyout name Value (£m) Buy-out Source Month
Park Resorts 440 Secondary Buy-out Mar
Drive Assist UK 250 Secondary Buy-out Feb.
Liverpool Football Club 219 Public-Private Mar
Vertex Data Science 218 United Utilities plc Mar
Butron's Foods 210 Secondary Buy-out Mar
Americana International Group 190 Secondary Buy-out Mar
Jimmy Choo 185 Secondary Buy-out Feb.
V Holdings 180 Secondary Buy-out Mar
Fletcher Bakeries 160 Northern Foods plc Jan.
Moody International 159 Secondary Buy-out Jan.
Caffe Nero Group (Rome Bidco) 139 Public-Private Feb.

NBGI MAKES 4X RETURN
UK mid-market firm NBGI Private Equity has sold sandwich maker Brambles Foods to Food Partners, a rival UK business owned by Duke Street Capital. The sale has generated an IRR of 52 percent and represents a return of 4.3 times the original investment. NBGI bought the business in July 2003 and completed the bolt-on acquisition of Harry Mason, another sandwich maker, in 2005. Duke Street recently bought UK snack maker Burton's Foods, from HM Capital for what was thought to be about £200 million (€294 million, $395 million). London-based NBGI recently sold Wraith Accommodation, a business that rents and sells accommodation units, generating an IRR of 48 percent.

UK BIOTECH START-UP RAISES £3M ON AIM
EpiStem, a biotech spin-out from the Paterson Institute for Cancer Research, has received £3 million (€4.4 million, $5.9 million) in a financing round that coincides with its initial public offering on London's alternative investment market. £425,000 of this has been raised from Beer & Partners, the UK's largest business angel network. Other investors in EpiStem include London-based venture capital firms Calculus Capital and Zeus Capital, asset management firm Rensberg Sheppards, the University of Manchester, and Jon Moulton, the founder of London-based mid-market firm Alchemy Partners. Established in 1995, Beer & Partners represents about 150 clients seeking funding in the £25,000 to £5 million bracket each year. Following the death in December of its founder and chairman David Beer, it appointed Michael Weaver as chief executive and Robert Iggulden as chairman.

AXA BUYS FLEX GROUP
The private equity business of French insurance company AXA has bought Flex Group, a German power tools manufacturer, from GSO Capital for an undisclosed amount. Flex was previously part of the Black & Decker Group, and was bought by GSO in November 2005. The business generated sales of €60 million ($80 million) in 2006. AXA Private Equity has offices in Paris, Frankfurt, London, New York and Singapore, and has more than €10 billion under management.