Candover Investments Plc, the British private equity firm that halted investments in January, agreed to sell its Candover Partners Ltd. buyout unit and part of its portfolio as it seeks to return cash to shareholders.
Candover Partners will be sold for “nominal consideration” to Arle Capital Partners LLP, a new firm formed by some of Candover Partners’ executives, the company said today in a statement. The investment trust will also sell 29.1 percent of its portfolio to a unit backed by Arle and Pantheon, a London-based fund of funds manager, for as much as 60 million pounds ($94 million), or a 14 percent discount to the value carried in the firm’s books, it said.
“The sale of Candover Partners to its executives will create an independent, motivated and incentivized manager focused on maximizing and realizing the value in the portfolio,” Malcolm Fallen, chief executive officer of Candover Investments, said in the statement.
Candover Partners was forced to shut its 3 billion-euro ($4 billion) leveraged buyout fund in January after Candover Investments, its publicly traded parent, ran out of cash and canceled a 1 billion-euro commitment to the pool in March 2009. Candover Investments said in August it wouldn’t back any other funds and that it would focus on returning cash to shareholders, which stoked talks among executives at the buyout unit about a spinoff, people familiar with the matter said previously.
Stable Investment Team
“It is good to see Candover finally resolve the management issue, with the team now taking themselves out of the listed vehicle,” said Iain Scouller, an analyst at Oriel Securities Ltd. with a “hold” rating on Candover Investments. “This should give stability to the investment team, who will be important when working out the investment portfolio over the next few years.”
Gerry Grimstone, chairman of Candover Investments since 2006, will stand down once the sales are completed and a search for a successor has begun, Candover also said today.
The firm rose as much as 3.3 percent, before closing unchanged at 702 pence in London.
Arle, which was named after a river that runs through the Candover valley in the southern English county of Hampshire, will be led by John Arney, the firm said. The 42-year-old became managing partner of Candover Partners in August 2009 after Colin Buffin resigned and Marek Gumienny became chairman.
The buyout team will continue to manage Candover’s 2001, 2005 and 2008 buyout funds, the firm said. Arney’s plan is to try to raise another pool in 18 to 24 months, once his team has shown good returns selling assets, people familiar with the matter said previously.
The deal gives the team options “including raising a new fund, but there’s no timeline to do that,” Helen Walsh, a spokeswoman for Candover Partners, said in an interview.
Gumienny, 51, is planning to retire once the firm exits investments he led in Dutch machinery manufacturer Stork BV, Italian gym equipment supplier Technogym, Swiss automotive intelligence provider EuroTaxGlass’s Group and Spanish amusement park operator Parques Reunidos SA, Walsh said.
Arle’s future investment plans will be led by deal partners Arney, Mark Dickinson, Javier Abad and Nils Stoesser, Walsh said. The investment team will be reduced from 36 executives to about 24, she said.
Investing With Pantheon
The buyout team agreed to invest 4 million pounds in the Pantheon-controlled holding company that will buy the assets from Candover Investments, Fallen said on a conference call today.
Pantheon, which manages $22.4 billion of assets, bought secondary interests in Candover’s funds raised in 2008 and 2005 before approaching Fallen directly about a sale a few months ago, Elly Livingstone, head of Pantheon’s secondary unit, said in an interview. Candover Partners’ independence “was a condition for us, which the Plc fully agreed on,” Livingstone said.
“We were very familiar with the portfolio, we like the team,” Livingstone said. Pantheon recently raised $3 billion to target stakes in buyout funds sold by limited partners.
Candover Partners had gross assets of 53 million pounds as of June 30. The sale of part of the portfolio will help reduce net debt to 16 million pounds from 59 million pounds on June 30, Oriel’s Scouller said.
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