July 5 (Bloomberg) -- Doughty Hanson & Co., a U.K. buyout firm that's trying to raise a 3 billion-euro ($3.7 billion) takeover fund, is returning all the money to investors in its last fund after earning $1.5 billion in five days from two asset sales.

The London-based firm today agreed to sell Dunlop Standard Aerospace Group Ltd., a maker of airplane parts, earning $668 million. That transaction followed the sale on Wednesday of German car repairer ATU Auto-Teile-Unger AG that's making Doughty Hanson about $850 million.

Doughty Hanson's latest fundraising has taken two years as investors waited for more cash to be returned from the last fund, a $2.66 billion pool completed in 1998. The firm has now covered the $2.2 billion cost of all purchases from that fund after selling five of 13 investments.

``Fundraising has been on hold because the market climate was difficult,'' co-founder Nigel Doughty, 47, said in an interview. ``We had to give this money back before we could complete fundraising.''

Doughty Hanson in September said it had attracted 700 million euros for the new fund. Fundraising will stop later this year, Doughty said.

The firm's efforts to sell assets were held back by a slump in takeovers and initial public offerings from 2000 to 2003. Doughty Hanson scrapped a plan to sell Dunlop Standard to competing buyout firm Charterhouse Capital Partners LLP after the Sept. 11, 2001, terrorist attacks on New York and Washington. In 2002, it canceled an initial public offering for Dunlop as stock markets slumped.

Scrapped Share Sales

Doughty Hanson scrapped share sales of at least four companies in 2002, including LM Glasfiber A/S, a Danish maker of wings used in wind turbines, and FL Selenia SpA, an Italian maker of automotive lubricants. Doughty Hanson last year sold FL Selenia to a U.S. buyout firm, earning about $455 million.

In 1998, Doughty Hanson was manager of Europe's largest buyout fund. Now at least eight firms have larger European funds, led by Permira Advisers Ltd., which raised 5.1 billion euros in a six- month period last year.

Doughty and co-founder Richard Hanson, 48, have worked together since 1985, when they started a buyout unit at Standard Chartered Plc. They formed their own firm in 1995. Between 1987 and 2002, they generated $1.94 billion of cash from investments that cost $733 million.

Meggitt Plc, a U.K. maker of target drones and components for airliners, and U.S. buyout firm Carlyle Group are buying Dunlop Standard for about 784 million pounds ($1.44 billion) from Doughty Hanson. Meggitt will keep the design and manufacturing unit and Carlyle will buy the engine-maintenance business.

Future asset sales from Doughty Hanson's last fund will now result in profits for the firm's investors -- mainly pension managers and insurance companies -- and the firm's partners, who keep 20 percent of any gains, as is typical for the industry.

The fund still owns LM Glasfiber; British baking and milling company RHM Ltd.; Priory Healthcare, a U.K. chain of mental-health clinics; Impress Holdings, a maker of metal packaging; Knowles Electronics Holdings Inc., a U.S. maker of transducers for hearing aids; and U.S. publisher North American Membership Group. The fund also has a stake in technology investments made by Doughty Hanson's technology fund.

The fund lost $196 million invested in Trend Technologies Inc. after the U.S. maker of plastic and metal casings for electronics companies when bankrupt in 2002.

To contact the reporters on this story: Simon Clark in London sclark4@bloomberg.net.

Last Updated: July 5, 2004 06:35 EDT