3i has agreed to sell a “significant” portion of its European venture portfolio to Coller Capital and HarbourVest Partners, ending roughly six months of market speculation and at least three months of exclusive negotiations.
The secondaries firms will acquire around 30 portfolio investments via Encore I, a fund that will have a maximum size of £170 million ($280 million; €192 million) and provide “significant follow-on capital” for the companies over the next few years.
The Encore fund will be managed by Encore Ventures, a recently established, secondaries-focused affiliate of venture firm DFJ Esprit.
The companies that will be transferred to Encore’s stewardship include hotel booking site FastBooking, wireless broadband provider The Cloud and orthobiologics company ApaTech.
Peter Wilson, managing director at HarbourVest, added: “This transaction presented a rare opportunity to acquire high quality, European-based venture assets.”Jeremy Coller, his eponymous firm’s chief investment officer, said in a statement the buying consortium is “privileged to be taking the baton” for “this portfolio of exciting young European technology companies”.
Publicly listed 3i hired advisor Campbell Lutyens around March to broker the secondaries sales, as the London-based firm continues to chip away at its debt and wind down its venture activities.
Market sources told PEO at the end of July that Coller and HarbourVest had entered talks to purchase the assets, that would in turn be managed by DFJ Esprit.
3i’s proceeds were not disclosed in Sunday’s statement, though media reports have estimated the firm received £130 million. An anonymous source told the Financial Times the price represents a 16 percent discount to the value at which 3i carried the assets at the end of March.
Ian Lobley, head of 3i’s venture portfolio, said: “Given 3i’s strategy to divest our venture portfolio at good valuations, we are very pleased with this latest sale.”
Earlier this year, 3i sold a portfolio of 10 venture investments to direct secondaries firm Cipio Partners for around €18 million. In 2007, 3i sold its venture capital stakes in 13 companies to Shackleton Ventures, also a direct secondaries firm.
DFJ Esprit’s Encore division is led by Charles Cameron, a former director of Kleinwort Benson, Goldman Sachs and Jefferies International, and Brian Robertson, who was a managing director of Lehman Brothers until 2004, and previously at Kleinwort Benson. A trio of former 3i partners will join Encore.
DFJ Esprit, Coller and HarbourVest have previously worked together on secondary transactions, notably on the Prelude Trust and the Cazenove New Europe Access Fund.
Last summer, Coller paid £24.2 million to take private the London-listed Prelude Trust, a portfolio of 15 companies DFJ Espirit inherited in its 2006 merger with UK technology investor Prelude. The deal allowed the firm to focus on managing its funds in private – away from the public spotlight where it had traded at a deep discount to net asset value.
DFJ Esprit assumed management of the Cazenove New Europe Access Fund, acquiring stakes in 35 companies, in a £67 million transaction financed by firms including HarbourVest, Wilshire Associates and LGT Group.
Before becoming an affiliate of Silicon Valley’s Draper Fisher Jurvetson in 2007, DFJ Esprit was called Esprit Ventures, formerly Cazenove Private Equity. DFJ Esprit’s chief executive, Simon Cook, had previously been a partner with Elderstreet Investments and a director in 3i’s Cambridge office.
Cook said in a separate statement that DFJ Esprit has held a €70 million first close on its third venture fund, which is targeting €150 million. Its limited partners include HarbourVest, the European Investment Fund, Finnish Industry Investors, Partners Group, JPMorgan and LGT.