The head of CVC Capital Partners‘ Australian unit has resigned, as the company stares at losses of up to $1.8 billion from its Nine Entertainment buy, dealing a blow to the private equity firm’s plans to bed down with the world’s elite, Reuters reported Thursday. The departure of Adrian MacKenzie, a key player in the A$5.3 billion ($5.6 billion) debt-funded acquisition of Nine and 17-year veteran at CVC, means the television network could fall into the hands of its lenders while wiping out CVC’s equity.
(Reuters) – The head of CVC Capital Partners’ Australian unit has resigned, as the company stares at losses of up to $1.8 billion from its Nine Entertainment buy, dealing a blow to the private equity firm’s plans to bed down with the world’s elite.
The departure of Adrian MacKenzie, a key player in the A$5.3 billion ($5.6 billion) debt-funded acquisition of Nine and 17-year veteran at CVC, means the television network could fall into the hands of its lenders while wiping out CVC’s equity.
MacKenzie, a former investment banker who moved from London to head the Australia unit in 1999, leaves ahead of scheduled meetings with investors in Hong Kong next week, said sources who declined to be identified.
The loss on Nine, which would be the biggest for a single buyout deal in Asia, comes at a critical time for CVC as it prepares to raise new funds in Europe and Asia, and brings new investors on board with capital to help drive expansion plans.
Singapore sovereign wealth fund GIC and Kuwait Investment Authority (KIA) are among investors that have already taken a combined 10 percent stake in the firm, a move that sees them secure seal a better deal from their investments.
It has also affected four of CVC’s funds, including two in Europe, and caused the firm to pull back from Australia.
Goldman Sachs and CVC have proposed a debt-to-equity swap for Nine, which like other media companies has seen profits tumble as advertising revenues followed viewers and readers online. One source said there are hopes the parties will come to an agreement by mid-November.
CVC was the first big international private equity firm to set up shop in Australia, notching its first success in 2004 with the float of clothing group Pacific Brands.
Despite the looming loss, private equity investors say CVC has outperformed its peers, and expect it to do well when it attempts to raise more capital next year.
The firm is eyeing a new fund for Asia and a 10 billion euros ($13.06 billion) European fund, which would be one of the largest funds raised since the financial crisis.
WEALTH FUNDS SCOOP
CVC, which has investments in Formula One and theme parks group Merlin Entertainment, sold a 10 percent stake to new powerful backers, informing all of its investors of the deal in June, a source familiar with the matter said.
CVC has declined to comment on the investors. GIC declined comment, while KIA could not be reached for comment.
The deal is another sign of how the biggest players are using their clout to negotiate better deals and fee breaks with leading private equity houses.
“Getting better returns is at the heart of this strategy,” said Antoine Drean, chairman of Triago, a firm that helps private equity houses raise money from investors.
By buying into the management company alongside the private equity partners, investors can get first refusal on investments alongside funds in deals and earn a slice of lucrative performance fees, also known as carried interest.
China sovereign wealth fund CIC, GIC, KIA and recently Qatar sovereign fund, Qatar Investment Authority (QIA), have been at the forefront of such investments. But such deals can also be welcome news for private equity firms.
A deal with investors will help CVC pursue a plan to become more global and develop its business beyond private equity, in areas such as debt management, in the footsteps of the larger U.S. groups such as Blackstone, KKR and Carlyle Group, a person familiar with the situation said.
Last year, GIC and Kuwait Investment Authority bought a 4.5 percent stake in TPG Capital, while CIC in 2007 acquired around 10 percent of Blackstone Group for $3 billion ahead of that firm’s IPO.
QIA recently acquired 22 percent of China private equity firm CITIC Capital Holdings.
GIC, which industry experts estimate manages at least $300 billion in assets, has invested billions of dollars in banks and private equity in the past few years. It is the biggest shareholder of UBS with a 6.45 percent stake.
It has 11 percent of its assets in the category it defines as private equity and infrastructure. GIC does not disclose its asset size or key investments. (By Stephen Aldred and Simon Meads)