Candover: Takeover Talks Over, Will Meet Covenants

British buyout firm Candover Investments (CDI.L) said it had ended talks with potential acquirers and looks set to meet key debt covenants thanks to cost cuts and disposals.

The troubled group said in March it had run out of cash to invest in its own 2008 fund and received takeover approaches.

Candover said on Monday talks with would-be buyers had ended as none of the proposals “had sufficient certainty and value to shareholders to justify further consideration.”

But it said it was confident it would meet covenants attached to its 2014 loan notes, helped by 36.2 million pounds ($59.6 million) in proceeds from the sale of energy research firm Wood Mackenzie.

Candover had no need to sell itself cheaply thanks to its “transformed” financial position, Cazenove analyst Christopher Brown said.

“We always struggled to understand why a third party would pay a big premium to Candover’s share price to acquire secondary assets more expensively than they could do in the private market, and without the hassle,” said Brown.

Candover’s woes reflect those of the wider industry as private equity firms struggle to keep the confidence of their investors and battle against falling company revenues and sliding portfolio valuations.

But in a rare high-point for private equity activity, it sold Wood Mackenzie for 553 million pounds to rival Charterhouse earlier this month, the largest European buyout of the year [ID:nLJ251842].

It is also in the final stages of selling a minority stake in German publisher Springer Science and Business Media, sources have said, with investment partner Cinven CINV.UL.

STRENGTHENED POSITION

Candover shares rose as much as 10 percent and were up 5.2 percent at 326.5 pence at 1106 GMT, valuing the firm at nearly 72 million pounds.

An offer that did not reflect the value of the investments would not be in shareholders’ interests, said Candover chairman Gerry Grimstone, “nor would other measures that would result in an unacceptable dilution.”

Cazenove’s Brown interpreted that as Candover ruling out a possible capital raising: “This is encouraging as it presumably means that Candover can see some other opportunities to raise capital from its existing portfolio as well as less of a need to prop up existing 2005 investments,” he said.

Candover said it has enough cash to keep the portfolio companies in its 2005 fund afloat, after closing its Eastern European and Asian operations, saving around 7 million pounds, and divesting a further 5.9 million pounds of assets.

But it suspended its 2008 fund with around 2 billion pounds of commitments — far short of its 5 billion target — on April 6 for six months.

The firm said talks on the future of the fund are now under way with investors, with analysts suggesting the fund could wind itself up gradually by selling off its investments.

By Simon Meads and Myles Neligan
(Editing by Matthew Scuffham and David Cowell)