SOME LOCAL DIFFICULTIES

Until recently, listed French investment group Wendel Investissement has been able to bathe in little but positive publicity. Neutral observers have looked on admiringly as chief executive Jean-Bernard Lafonta has successfully pursued the transformation of the company from a domestically focused industrial holdings company to a private equity investor increasingly looking to play on the global stage (as its recent expansion into the US and Asian markets testifies).

When Wendel listed electrical goods firm Legrand on the Euronext exchange in April 2006, it arguably represented the high water mark of Wendel's private equity activities to date. The IPO was 30 times oversubscribed, enabling Wendel and deal partner KKR to take huge profits off the table while retaining significant stakes in the firm.

Fast forward to January 2008, and ratings agency Standard & Poor's first placed Wendel on negative credit watch and then announced that it was downgrading its long-term credit rating from BBB to BBB- and its short-term credit rating from A-2 to A-3. Wendel subsequently issued a press release expressing its “regret” at the decision and defending its balance sheet as “solid”.

In particular, Wendel defended the funding put in place to support its stake-building in Compagnie de Saint-Gobain, Europe's largest provider of construction materials. Wendel said it had organised its funding so that “it can react to any movements in the Saint-Gobain share price without suffering a liquidity crisis”. Since it started building a stake in Saint-Gobain eight months ago, Saint Gobain's share price has lost 31 percent of its value and Wendel's has declined 39 percent.

Nor have Wendel's troubles only extended to declining share prices. Negotiations with Saint-Gobain have, at least some of the time, been tense. Prior to its first approach, rumours had been circling that Saint-Gobain was ripe for takeover – meaning that Wendel's intentions may initially have been misconstrued. Says a source close to the negotiations: “Wendel was offering to give Saint-Gobain a helping hand, but Saint-Gobain reacted as if Wendel had asked to look up its skirt.”

At the time of going to press, events seemed to be turning in Wendel's favour. It appeared poised to raise its stake from 18 percent to 21.5 percent and, according to sources, had been granted three seats on the Saint-Gobain board. The two firms also appeared to have reached a compromise on the previously divisive issue of double voting rights.

EC SETS OUT SOVEREIGN WEALTH CODE
The European Commission has issued a voluntary code of conduct for sovereign wealth funds. The commission hopes the code will serve as a template for governance and transparency standards for sovereign wealth funds to be agreed at a wider international level beyond the EU. Commission president José Manuel Barroso said in a statement: “Sovereign wealth funds are not a big bad wolf at the door. They have injected liquidity and helped stabilise financial markets. They can offer reliable long-term investments our companies need. To ensure this, we need global agreement on a voluntary code of conduct – it is to this end that we make a contribution today.”

Barroso said he would propose European legislation if he could not achieve results by voluntary means.“On international financial markets in general, we are asking EU leaders to confirm loud and clear that Europe will take an effective common approach to tackling the weaknesses exposed by the recent turmoil.”

The Commission recommends sovereign wealth funds clearly allocate and separate responsibilities in internal governance structures. The funds should issue an investment policy that defines their overall objectives. Funds should have autonomy from their sponsor governments and they should publicly disclose the general principles of their relationship with government authorities.

CVC ROMPS TO EUROPEAN FUND RECORD
European buyout firm CVC Capital Partners, led by chairman Michael Smith, is set to close its latest fund above its €11 billion ($16.7 billion) target at €12.1 billion, according to a source close to the company, confirming a report in UK newspaper the Daily Telegraph. The fund will be closed imminently having reached its self-imposed cap, the source added. The previous record for a European private equity fund was held by Permira, which closed an €11.1 billion vehicle in July 2006. CVC's previous fund closed on €6 billion in June 2005. The firm subsequently raised a €4 billion side-car fund to invest alongside the main fund in October 2006. The latest fundraising is notable given the difficulties in the credit markets that surfaced last summer and which continue to reverberate. Banks have been unwilling to provide debt for mega-buyouts since then, and there are few signs as yet of the funding drought ending.

VITRUVIAN CLOSES ON E925M
Vitruvian Partners, a European growth buyout firm, has held a final close on its debut fund slightly ahead of its €900 million ($1.4 billion) target after launching just over a year ago. The fund marks the return of Toby Wyles, the veteran Apax Partners manager, to the market with a blue-chip spinout of deal-doers and operators from Apax, BC Partners and Bridgepoint. The firm was the first spinout from Europe's blue-chip buyout firms since Harald Mix left Industri Kapital to found Altor Equity Partners in 2003. Wyles, who was with Apax for 13 years and was co-head of its European leveraged team when he left in 2003, is one of three managing partners alongside Michael Risman, also a global equity partner at Apax until October 2005, and Ian Riley, a senior partner with rival firm BC Partners until he left in August 2003. David Nahama, a partner at Apax investing in venture deals and part of that firm's technology and telecom team, joined Vitruvian as a partner. Mark Hartford, a former chief financial officer at Bridgepoint, the European buyout group, was the final partner in the starting line-up. The firm has already made one investment in Latitude, a UK internet search marketing agency, in December last year.

CAPVIS DOUBLES UP
Capvis Equity Partners has raised CHF1 billion ($995 million; €628.8 million), according to an investor. It had initial plans to raise €500 million ($760 million) in March 2007. The fundraising is nearly double the Swiss mid-market firm's previous fundraising effort, which raised €340 million in 2004. This was the largest fund raised by a domestic Swiss private equity firm. Its nearest local rival Argos Soditic raised €275 million in 2006. Fundraising was carried out by placement agent MVision. Capvis invests in companies with a turnover of between €50 and €500 million, and prefers to acquire a majority stake. It invests a minimum of €15 million in each transaction.

NORWAY'S HITECVISION OVERSUBSCRIBED
HitecVision, the Norwegian oil and gas specialist, has closed its fifth fund on $800 million (€527 million) exceeding its $600 million target, according to a spokeswoman. The fund, led by chief executive Ole Ertvaag, was oversubscribed three months after fundraising was launched in November. The firm's Nkr690 million ($132.8 million; €87.3 million) third fund from 2002 has made an eight times return on realised investments with an internal rate of return (IRR) of 279 percent on these investments. The entire fund's realised and unrealised investments are estimated at 236 percent IRR. The largest investor in its latest fund is Norwegian fund of funds Argentum which made a $77.5 million commitment, the biggest fund commitment it has ever made. Other investors include Goldman Sachs, Adams Street Partners, Paris-based fund of funds Access Capital Partners, Danish limited partner ATP Private Equity Partners and Swiss fund of funds manager Partners Group.

FIRST INDEPENDENT PRAGMA FUND BEATS TARGET
French mid-market firm Pragma Capital has closed its second fund on €345 million ($521 million), breaking its original target of €300 million. It is the firm's first independent fund since it bought out original cornerstone investors French banks Credit Agricole and Credit Lyonnais in 2004, which owned a 45 percent stake in the management company. The firm's four founding partners came from Credit Agricole's and Credit Lyonnais' in-house private equity teams. Its prior fund, which closed in November 2002, raised €236 million. The fund was comprised of 50 percent French investors and 50 percent European investors including French insurer AXA, French bank BNP Paribas and Belgian investment company GIMV.

FIRST CLOSE FOR EURO TECH SPECIALIST
TLcom Capital, a UK-based venture firm, has held a first closing of its second fund, TLcom II, in excess of €50 million ($75.4 million) eight years after closing its first vehicle. The target size of the fund is €150 million and it is looking to invest in European, revenue-generating early-stage technology. Maurizio Caio, managing partner of TLcom Capital, said the firm had had to exit some investments and show progress in the portfolio before it could come back to market. The firm had held brief, preliminary discussions with investors a couple of years ago. Caio said the perfect storm of the dotcom bubble had helped and hindered TLcom's first fund and delayed a return to market. “It was partly about cleaning up the portfolio, but mostly it was about building up the portfolio. Because of the bubble we really didn't start investing until 2002,” he said.