Candover Investments Selling Portfolio Companies, Winding Itself Up

(Reuters) – Private equity firm Candover Investments said it will wind itself up, sealing the fate of one of the buyout industry’s highest-profile victims of the credit crunch.

Candover’s move to sell its portfolio of companies, which includes oil-field services firm Expro, and return cash to shareholders and investors follows a failed attempt to sell the business last month and ends months of uncertainty over its future.

Many private equity houses have suffered through the downturn, as portfolio companies overburdened with debt have struggled to meet repayments.

But Candover’s complicated structure — with a listed parent that co-invests alongside an independent but wholly owned fund manager, Candover Partners, over which it has no say — drew heavy criticism and lay at the heart of the firm’s woes, analysts said.

When the listed company ran out of money to invest in the fund manager’s planned 5 billion euro ($6.32 billion) 2008 fund, the whole structure unraveled.

At the start of this year as rivals, having stemmed the worst of the losses, jumped back into new deals, Candover’s dealmakers were forced to hand money back to investors.

Candover said Tuesday it intends to return cash to shareholders as portfolio companies are sold, winding up the listed vehicle when the process is complete.

“Whilst this is a sorry demise for what was one of the UK’s leading private equity funds until a couple of years ago, we think it is the most sensible course of action in the circumstances,” said Oriel analyst Iain Scouller in a note.

Before the 2008 financial crisis, Candover was seen a leader in the European buyouts industry, participating in deals such as the merger of Gala and Coral Eurobet to create Britain’s leading gaming firm. Candover and its investment partners subsequently lost control of the company to a group of lenders.

EXTRACTING VALUE

Candover said Tuesday there is still significant value in its portfolio, including oil-field services company Expro, which accounts for almost one third of the firm’s valuation.

But net asset value (NAV) fell 13 percent in the six months to the end of June to 903 pence, as valuation multiples declined, driven in part by BP’s ruptured Macondo well, the world’s worst offshore oil spill.

“What we have to do over the coming months is look at the range of returns we think can be achieved and the likely timescale in which Candover Partners believe that realization process is likely to deliver cash back to Candover Investments,” said chief executive Malcolm Fallen in a conference call with reporters.

Shares were up 0.8 percent at 600 pence at 1058 GMT as the news drew a line under Candover Investments’ future.

Upgrading Candover to “add,” Oriel said the potential returns to shareholders from the sale of portfolio companies are likely to be well above the current share price.

Having agreed the sale of diaper-maker Ontex to TPG and the private equity arm of Goldman Sachs last month, Candover is in exclusive talks about selling on and off-shore trust services firm Equity Trust to rival Doughty Hanson for about 300 million pounds ($462.2 million), a source familiar with the situation said.

Candover declined to comment, Doughty Hanson was not immediately available for comment.

Candover has been reviewing options for theme park operator Parques Reunidos and has received offers from rival private equity firms, sources have said.

It’s portfolio of maturing assets includes bed and mattress maker Hilding Anders and Glass’s Guide publisher EurotaxGlass.

Candover’s dealmaking team, led by Chairman Marek Gumienny and managing partner John Arney, but diminished by the firm’s troubles, has hinted at plans to raise new funds.

Fallen declined to comment on the partners’ plans on Tuesday.

($1=.7861 Euro)
By Simon Meads
(Editing by David Cowell and Erica Billingham)