CVC Said to Sell 10% Stake to 3 Sovereign-Wealth Funds

CVC Capital Partners Ltd. agreed to sell a 10 percent stake in itself to three sovereign-wealth funds to finance investments and expand its infrastructure and credit units, two people with knowledge of the move said.

The private equity firm briefed investors on the move at its annual meeting in London last week, said the people, who asked not to be identified because the discussions are private. One of the buyers is based in the Middle East and the other two in Asia, one of the people said. CVC didn’t provide a valuation, the people said.

Closely held CVC, which owns motor championship Formula One and Virgin Active gyms, follows competitors such as TPG Capital and London-based Apax Partners LP in selling a stake to sovereign-wealth funds. TPG, the firm started by David Bonderman and Jim Coulter, sold a minority stake to the Government of Singapore Investment Corp. and the Kuwait Investment Authority last year. Apax sold a 10 percent stake to China Investment Corp., Australia’s Future Fund and the GIC.

The firms are seeking capital to expand beyond buyouts and to secure money for new investments as they struggle to raise money for new funds from their traditional investors. CVC is preparing to raise another leveraged buyout from investors that may be as big as the 10.8 billion-euro ($14 billion) pool it amassed in 2008, people familiar with the matter said in May. That would make it the largest fund being raised today.

A spokesman for CVC in London declined to comment.

Cordatus Unit

Outside shareholders also make it easier for founders to cash out. CVC was started in 1981 as the European private-equity arm of Citigroup Inc. predecessor Citicorp, before being acquired by its managers in 1993. The firm, whose biggest office is in London, is chaired by Michael Smith, 59.

Other firms such as New York-based Blackstone Group LP and Washington-based the Carlyle Group chose to sell stakes in their management companies through initial public offerings.

In January, CVC bought Resource America Inc.’s leveraged-loan investment unit to combine it with its own Cordatus debt investment operation which it started in 2006. CVC also manages leveraged buyout funds that focus on the Asia-Pacific region.

Buyout firms such as CVC typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. The firms seek to improve performance at the companies they acquire or expand them before selling them within about five years.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE