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Candover Spin-Out Eyes First Fund, Busy With Exits-CORRECTED

Executives with Arle Capital Partners are preparing to raise their first independent fund since the London-based buyout shop spun out Candover Investments Plc earlier this year, Partner Nils Stoesser told Buyouts.

The fund is still very much in the planning stages. But Stoesser said the firm would likely try to raise around €750 million to €1 billion ($1.3 billion). The firm is in talks with placement agents and other fundraising intermediaries, he said, and will make a final decision on whether to raise the fund next year.

Despite the sovereign debt crisis rattling global markets, Stoesser said there is still appetite among limited partners for firms that buy European companies with global businesses. About 50 percent of Arle Capital’s existing investors are based in the U.S., he said. They include the Alaska Retirement Management Board, the Colorado Fire & Police Pension Association and the Public Employees Retirement System of Nevada, according to the Dow Jones Directory of Alternative Investment Programs.

“When you talk with investors about the quality companies in Europe who export to the U.S., Asia and elsewhere there’s still a keen desire to take European exposure,” he said.

The fundraising plans are coalescing as Arle Capital, which has 12 investment professionals, has been ramping up its exit activity.

Yesterday it announced it agreed to sell Capital Safety to Kohlberg Kravis Roberts & Co. for $1.12 billion. If the deal closes in January as expected, Arle Capital will have generated 2.7x its invested capital in the maker of harnesses, lifelines and other protective equipment for people who work in the energy, construction and other industries, according to a statement the firm released.

Meanwhile, Arle Capital is in the process of selling Qioptic, a Luxembourg-based manufacturer of optical components and modules for military and commercial uses. Stoesser declined to discuss the process, which is being run by Credit Suisse and Rothschild, other than to say that a “handful” of entities—including U.S.-based private equity firms—are looking at the company. He also said Qioptic is expected to generate $400 million this year; the company could be valued at up to $800 million, according to reports.

Late last year, the firm also sold Ontex, a Belgian diaper manufacturer that struggled amid heightened competition and debt, generating .75x return, and earlier this year it sold Equity Trust, an Amsterdam-based, financial advisory group, to Doughty Hanson & Co., generating a 1.5x return on invested capital, according ot Stoesser said.

Arle Capital seeks to buy businesses in the energy, industrial and services sectors based in Europe but with global operations. The firm has some capital left from its previous fund, the Candover 2008 Fund, but it can only use it to support existing investments.

Correction: An earlier version of this story incorrectly stated Candover Investments was no longer in business. It also stated that Arle Capital agreed to sell Capital Safety to The Carlyle Group, and that Qioptic is based in Paris.