Clayton, Dubilier & Rice has embarked on what could be the largest GP-led process yet.
Limited partners in Clayton, Dubilier & Rice X are to decide whether to roll into a new vehicle with glass repair business Belron or to sell their holdings to secondaries buyers, according to three source familiar with the matter.
The continuation vehicle will be between €4 billion and €5 billion in size, with CD&R likely to be the largest investor in the fund, according to one of the sources.
Rolling LPs will not pay fees and will agree to carried interest of 20 percent over an 8 percent hurdle, according to one LP source in Fund X.
It is understood that Lazard is advising on the deal. Affiliate title Buyouts first reported on the potential process in June.
The identities of the lead buyers are not clear, nor whether they will receive the same economics as rolling LPs.
Last month, CD&R sold a 13 percent stake in Belron to funds managed by Hellman & Friedman, BlackRock Private Equity Partners and Singapore’s sovereign wealth fund GIC. The process set the price for the secondaries deal, with CD&R rolling its remaining 24 percent stake into the continuation vehicle, Secondaries Investor understands.
The minority stake sale gave Belron an enterprise value of €21 billion and an equity value of €17.2 billion, according to a statement from law firm Debevoise & Plimpton, which advised CD&R on the process.
Fund X raised $10 billion by final close in 2017. LPs include the California Public Employees’ Retirement System, the California State Teachers’ Retirement System, CPP Investments and Los Angeles Water & Power Employees Retirement Plan, according to Secondaries Investor data.
The largest GP-led deal to date was on Hellman & Friedman Capital Partners VII, according to Secondaries Investor‘s map of the largest continuation fund deals. The $5 billion process, which closed in the second half of last year, was backed by Goldman Sachs Asset Management, Strategic Partners, HarbourVest Partners and Lexington Partners, among others.
Single-asset secondaries are increasingly seen as a “crown jewel strategy”, helping general partners keep the upside in their best assets rather than having to sell them on, Evercore senior managing director Nigel Dawn told Secondaries Investor.
“It’s inevitable that many of the best assets that have historically transacted through the sponsor-to-sponsor channel will be transacted through the secondary market going forward,” he said.
GP-led transactions focused on a single company accounted for one quarter of all secondaries deals by volume in the first half of this year, equivalent to $12 billion, according to Evercore’s half-year secondaries market review.
CD&R and Lazard declined to comment.