Candover Cuts Off Flagship Fund

(Reuters) – Crisis-struck private equity house Candover (CDI.L) ditched ambitious plans for its 2008 flagship fund, shutting off cash supply for further deals, and raising question marks over the firm’s future.

The move by one of private equity’s leading names highlights buyout firms’ fall from grace as investors have lost faith in the asset class after two years of poor returns.

The British group proposed to scale back future commitments to just 100 million euros ($151 million) from 3 billion, it said on Friday, to provide cash for the fund’s sole investment, oil and gas services business Expro.

Under the proposal being put to investors, it will make no further new deals out of the 2008 fund launched last year.

“I think, over the years, this will be seen as a case study in what can go horribly wrong when you get too ambitious,” said Iain Scouller, an analyst at Oriel Securities.

The firm will still consider raising new capital for deals once the situation surrounding its 2008 fund has be resolved, a source familiar with the situation said.

TROUBLED TIMES

The company shocked investors in March when it said it had run out of cash to make its own 1 billion euro commitment to its own buyout fund. [ID:nLR493383]

It then shook up management, vowing to fix its unwieldy ownership structure in an attempt to win investor support.

Candover’s model, which sees a listed parent company invest alongside external investors in its buyout funds, has been criticised by investors and shareholders for being poorly aligned with their interests.

But the firm has no immediate plans to change company structure or cut further jobs after it slashed staff back to around 40 from over 100 earlier in the year, the source said.

Shares in Candover dipped just 2 percent to 471 pence at 1144 GMT, as the news drew a line under uncertainty surrounding the 2008 fund.

Despite the drastic scale-back, Candover may yet look at raising capital to pursue new deals, a source familiar with the situation said, possibly raising a new fund or collecting money on a deal-by-deal basis.

Much will depend on how much money Candover can realise from selling existing portfolio companies, as will protecting its four largest investments — Expro, Stork, Parques Reunidos and Alma Consulting — which account for some 75 percent of Candover’s net asset value, Scouller said.

Candover’s fund advisory board has agreed a short extension to the standstill agreement until Jan. 8 to allow the discussions to be concluded. ($1=0.6634 euros) (Editing by Dan Lalor and Hans Peters) ((simon.meads@thomsonreuters.com; +44 20 7542 9969; Reuters Messaging: simon.meads.thomsonreuters.com@reuters.net))