SVG Capital has reduced almost all of its exposure to Permira Europe III through a secondary sale, it said in its latest interim management statement.
The firm's remaining stake in the 2003-vintage Fund III was sold to an undisclosed buyer for £90.2 million, equivalent to a 13.3 percent discount to Permira’s most recent valuation of the fund, conducted in September.
The move was part of the firm’s ongoing attempt to reposition itself as a more diversified investor, return cash to investors and de-lever its balance sheet, according to a spokesperson.
Permira Europe III — to which SVG originally committed €425 million — has delivered a net IRR of 24 percent to date, SVG said in the statement. SVG will retain some exposure to the fund through its holdings in the Permira feeder fund vehicles. As part of the deal terms, SVG will retain the right to receive distributions relating to 50 percent of its direct exposure to Iglo Group, Permira Europe III’s largest remaining asset. SVG’s retained holding is valued at £76.3 million, it said.
The secondary sale comes as Permira nears a first close for its latest vehicle, Permira V. The London-headquartered buyout group, which is seeking €6.5 billion for the fund, is understood to be eyeing a first close in the next few months.
The investment period for Permira Europe IV expires in March, so the firm will need to have reached a first close for the new vehicle by then in order to have capital available for new deals.
Permira declined to comment on the fundraising.
While the SVG secondary sale comes at a sensitive time, it is in line with SVG’s stated strategy of diversifying beyond its historically close relationship with Permira.
“It was a capital allocation issue rather than anything else,” a source with knowledge of the situation said. “It was quite a mature asset and it was felt that if held to maturity, the incremental returns would be quite low going forward. The feeling was that capital could be better allocated elsewhere,” the source added.