BC LPs have 5 weeks to decide on Fund IX tender

Investors including CDPQ, Florida SBA and LACERA received a letter on Wednesday outlining the terms of the secondaries transaction, which includes a stapled commitment to the buyout firm’s latest fund.

Limited partners in BC Partners‘ ninth flagship buyout fund have until 9 August to decide if they want to sell their stakes in the 2011-vintage vehicle, Secondaries Investor has learned.

LPs received a letter on 5 July with an offer that allows them to sell their interest in European Capital IX, which has €6.7 billion in net asset value, at a 14 percent premium. They have five weeks to respond to the letter, but early chatter is that it is “a pretty attractive price”, according to a source familiar with the matter.

Secondaries Investor reported in early June that the London-headquartered buyout firm was working with Campbell Lutyens on a stapled deal process.

Secondaries firm Lexington Partners has emerged as the buyer, as reported by the Wall Street Journal. It has undertaken to purchase €1.2 billion from Fund IX as well as commit €600 million in new capital to BC European Capital X, which is in market seeking €7 billion.

The source said the results of the tender would determine the staple component, as Lexington has agreed to commit 50 cents to Fund X for every €1 sold in Fund IX.

LPs who decide to sell would secure a net internal rate of return of about 19 percent and a 1.6x investment multiple, according to the source.

The fund had a 17 percent net IRR and a 1.5x multiple as of 31 March, according to a source familiar with the fund.

According to PEI data,  at least 60 LPs initially committed to Fund IX.

North American pension plans include the California State Teachers’ Retirement System, Canada Pension Plan Investment Board, CDPQ, Florida State Board of Administration, Los Angeles City Employees’ Retirement System, Michigan Department of Treasury, New York State Teachers’ Retirement System and San Francisco Employees’ Retirement System.

Asian investors include Korea Investment Corporation and National Pension Service of Korea.

University endowments and foundations include Columbia University, the Rochester Institute of Technology, the Grable Foundation, the University of Oklahoma Foundation and the James S McDonnell Foundation.

Several insurance companies and private pension plans also committed to Fund IX such as Dusseldorf-based Ergo, Guardian Life Insurance Company of America, the Finnish Ilmarinen Mutual Pension Insurance Company and CNP Assurances of France.

Fund X has so far raised €6 billion, according to two sources familiar with the fundraise. BC has been on the fundraising trail for about one and a half years.

BC Partners and Campbell Lutyens declined to comment. Lexington was not immediately available to comment.