Private equity investor SVG Capital and global private equity house Permira, two firms that spun out of banking group Schroders plc in the 1990s, have signed an agreement to formalise their relationship.
As a result, SVG has guaranteed its role as a major investor in Permira's next two buyout funds, Permira IV and Permira V. SVG will seek shareholder approval for the agreement at its AGM on April 25th. However, CEO Nicholas Ferguson told PEO that major shareholders had already agreed to the deal.
Ferguson emphasised that the agreement does not represent a major shift in its investment strategy as commitments to Permira already make up 78 percent of the trust's assets. 'We have a very long relationship with Permira,' said Ferguson. 'They represent 75 to 80 percent of our assets, but 90 percent of our performance. This agreement guarantees us access to their future funds, which we expect to be very popular. This is a good trade for the loss of flexibility that it entails.'
SVG also announced that it will issue 6 million shares, or 4.7 percent of its share capital, to Permira at 600p each, representing a total investment of £36 million, in order to strengthen the relationship between the two firms and to further align their interests. In addition, Permira's managing partner Damon Buffini will join SVG's board as a non-executive director. To prevent conflicts of interest, he will not sit on the firm's investment committee.
Buffini told PEO that Permira had been attracted to the agreement by the chance to guarantee access to SVG's network of high net worth individual investors, and the chance to bring an element of certainty to its future plans.
Permira began life as Schroders Ventures Europe, an amalgamation of Schroders' French, German, Italian and British private equity businesses, when it raised the €890 million Permira I fund in 1997. The firm was renamed Permira in order to distinguish itself from its parent when the partnership between the two firms was dissolved in 2001.
The firm now manages a total of €11 billion in capital, and has offices in Frankfurt, London, Madrid, Milan, New York, Paris and Stockholm. Its €5 billion pan-European fund Permira Europe III is currently around a third invested. Permira IV will follow the same opportunistic pan-European investment strategy. However, it is not expected to open until fund III is substantially invested.
SVG Capital was established as Schroder Ventures International Investment Trust plc in 1996. The trust's fund management business manages or advises investment vehicles that invest in private or public equity using private equity techniques. It also invests in a portfolio of private equity funds, of which a majority are advised by Permira.
The LSE-listed firm says it has total assets of approximately €1.5 billion, and says its net assets have experienced a compound growth rate of 8.3 percent over the last five years.
SVG reported that 2004 saw a 17.7 percent increase in the net asset value of its shares to a 539.7p. Ferguson told PEO that, although improvements in the operating environment played a part, 'this growth is mostly thanks to Permira's success in improving the performance of their portfolio companies'.