Riverstone Holdings is relatively young, having been founded in 2000 as a joint venture with The Carlyle Group. But its fundraising momentum is consistent with a firm that has been around much longer.
According to investor sources, the New York-based firm is targeting a total of $10 billion (€7 billion) for its next round of fundraising, with a $6 billion target for a global energy and power fund and $4 billion for a fund that will invest in renewable energy assets.
The firm raised a total of $4.5 billion last year for predecessor global and renewable funds.
While private equity deals created all kinds of records during the first half of this year, the energy sector in particular lured an extraordinary amount of buyout dollars. According to Dealogic, the value of global private equity-backed energy deals through September 2007 was roughly $570 billion, nearly matching the total for all of 2006 and three times greater than the total for 2002. Deals include the $44 billion buyout of Texas utility TXU and Kinder Morgan, a $21 billion deal in which Riverstone participated as part of a consortium.
Riverstone has been expanding its global operations and bulking up its team with some high-profile appointments. In London, the firm has hired Lord Browne of Madingley, the former chief executive of BP, who resigned from the energy giant following a personal scandal. In a statement, Riverstone cofounder David Leuschen described Browne as “without question one of the most visionary, experienced and talented executives in the energy industry with an unparalleled global understanding”.
In September the firm added Ralph Alexander, another former senior BP executive, to the New York office.
Riverstone is led by Leuschen and Pierre Lapeyre, two energy industry veterans and former Goldman Sachs investment bankers. The combination of the Riverstone team with Carlyle's global fundraising machine is producing one of the few predictable outcomes in the rapidly changing global energy industry.
PRIVATE EQUITY EXPECTED TO SCALE UP
A new survey from Citi, which canvassed the views of pension managers in the US and Europe, found that allocations to the asset class have the potential to become much larger. The study found that 85 percent of these managers expect to raise their commitment to alternative investments over the next three years. This means that the pension funds will allocate almost 20 percent of their assets to alternative investments by 2010 versus 14 percent today (representing $1.2 trillion in new capital flows). The survey also found that, within three years, private equity allocations are expected to surpass hedge fund and real estate allocations. The majority of pension fund managers canvassed said they expect returns of 10-15 percent for private equity and less than 10 percent for real estate and hedge funds.
KKR TO RAISE DEBT HEDGE FUND
US buyout firm Kohlberg Kravis Roberts is in talks to set up a debt hedge fund underwritten by US bank Citi targeting $12.5 billion (€8.9 billion), billion), according to a source close to the negotiations. The vehicle, called Strategic Capital Fund, will have around $10 billion of financing from Citi and $2.5 billion in equity, said the source. Citi is currently in talks with KKR to guarantee the debt tranche. The vehicle is believed to have a cornerstone $1.5 billion investment from parent entity KKR Financial and is seeking $1 billion from investors. “This is an opportunistic attempt to profit from the discrepancy between the strong underlying credit of the debt and the fact it is trading at a discount,” the source added.
EX HOCKEY PRO HELPS RAISE GREEN FUND
Environmental Capital Partners (ECP) has raised $100 million (€71 million) for investments in green consumer products, eco-friendly building materials, alternative energy and industrial environmental services. The initial investors include the firm's founders and New York Private Bank & Trust. ECP was founded in February by former JP Morgan Partners senior advisor Robert Egan and Hamilton Capital Partners founder William Staudt, as well as Yale School of Forestry Professor Stephen Kellert and former New York Ranger ice hockey player Mike Richter. ECP will target investments of between $10 million and $25 million, and has relationships with other private equity firms and individuals that will enable it to lead co-investments of between $50 million and $75 million. The firm will make growth capital investments in green technology and alternative energy companies, and will seek buyouts in more traditional sectors such as engineering and consulting for environmental remediation and specialty chemical recycling, among others.
HICKS SPAC GARNERS $552M IN IPO
Hicks Acquisition Company I, Tom Hicks' special purpose acquisition company, has raised $552 million (€368 million) through an initial public offering. It is the biggest IPO to date for a blank-cheque pool, according to a statement. The SPAC sold 55.2 million units on the American Stock Exchange at $10 per unit, which consisted of one share of common stock and one warrant per unit sold. The vehicle also raised $7 million through the private sale of 7 million warrants to HH-HACI, an affiliate of Hicks' private investment company, Hicks Holdings. The SPAC will acquire one or more non-energy businesses in the US or Canada through a merger, capital stock exchange, asset acquisition, stock purchase, reorganisation or similar business combination. The vehicle has 24 months to complete an acquisition or be liquidated.
EIGHTH SIGMA FUND CLOSES ON $500M
US venture firm Sigma Partners has closed its eighth fund on $500 million (€355 million). The new fund will continue the investment strategy of its predecessors in targeting early-stage investments in the clean tech, infrastructure, semiconductor, software and wireless technology sectors. Sigma launched the fund in June 2007 with a $500 million target. The firm's existing limited partners all returned, with the addition of a couple of new LPs, said managing director Greg Gretsch. Sigma did not use a placement agent. The firm's sixth fund closed on $600 million in 2001, and its seventh on $400 million in 2005.
CALPERS COMMITS $1BN TO CARLYLE PARTNERS V
The California Public Employees' Retirement System (CalPERS) has disclosed a $1 billion (€707 million) commitment to Carlyle Partners V, a US buyout fund seeking as much as $17 billion. The commitment is the largest yet disclosed by the $250 billion Sacramento, California-based public pension, which has some $33 billion committed to alternative assets. CalPERS private equity investment staff professionals, led by Leon Shahinian, have told market participants that they plan on making larger commitments to fewer GP groups. CalPERS owns a 5.5 percent stake in Carlyle's management company, purchased in 2000.
LEHMAN CLOSES FIFTH VENTURE FUND
Lehman Brothers has closed its fifth venture fund with $365 million (€263 million) in commitments, including a $75 million contribution from the US investment bank. The oversubscribed fund, which had a $300 million target, will invest in growth-stage technology companies and be managed by a team based in Menlo Park, California and Boston, Massachusetts. The fund's limited partners were not disclosed, though investors in the bank's past venture funds have included the Canada Pension Plan Investment Board and Pennsylvania Public School Employees Retirement System
TH LEE LAUNCHES CREDIT FUND
Thomas H. Lee Partners has launched a credit affiliate, THL Credit Group, and a corresponding fund with $500 million (€360 million) in commitments. The fund will invest in securities through leveraged finance, structured credit and minority equity transactions, providing capital to companies with a minimum EBITDA of $10 million.
FORSTMANN, ALBRECHT LAUNCH MEDIA FUND
Former HBO chairman and chief executive Chris Albrecht and private equity veteran Ted Forstmann are currently raising a $250 million (€180 million) fund to target investments in media and entertainment content. Albrecht, who is credited for the development of TV hits such as Sex and the City and The Sopranos, has joined as head of global media business for talent agency and media company IMG, owned by Forstmann's private equity firm, Forstmann Little. He has also become a special limited partner in Forstmann's firm, which Forstmann said in 2004 he planned to wind down. The fund's LPs will comprise “big strategic investors” including major media companies.