Providence's 5x exit comes at the right time

Providence has completed its exit from Kabel Deutschland after an 18 month process that began with an IPO last year. The return generated bolsters the firm's latest fundraising effort.

Providence Equity Partners has scored a 5x return multiple on its exit of Kabel Deutschland, according to sources close to the transaction. The firm began drawing down on its investment with Kabel’s €760 million initial public offering last year, ultimately making more than $3 billion on its investment in Germany's largest cable operator.

Providence sold its remaining 22 percent stake in the company for around €822 million in July, offering 20 million shares at a price of €41.10 per share. The firm will vacate its seats on the Kabel’s board at the end of the month, the company said in a statement.

The completion of the exit process comes at a propitious time for Providence as it raises its seventh fund, which is targeting $6 billion, the source said. Some market sources had questioned the firm's ability to generate solid returns with multi-billion funds in previous interviews, but the Kabel exit will likely impress potential investors.

The firm’s past two funds have also performed reasonably well. According to performance numbers as of 31 December, Fund V, which at $4.2 billion in 2004 could be considered mega-fund territory, was generating a gross multiple of 1.3x and a 7 percent internal rate of return. Fund VI, which hauled in an impressive $12 billion in 2007, is producing a gross 1.1x multiple and a 6 percent IRR. That fund has risen since September, when it was generating a 1x total value multiple and a .80 percent IRR, according to performance data from the Oregon Public Employees Retirement Fund.

Providence was founded in 1989 and controls around $23 billion in assets under management, according to its website. The firm typically targets equity investments between $150 million to $800 million.