Montana Board of Investments has participated in a stapled secondaries deal involving the fourth and fifth funds of Chicago-headquartered private equity firm CIVC Partners, according to documents from the pension fund.
The LP had invested $25 million in CIVC Partners Fund IV, a 2009-vintage, $365 million buyout fund investing in financial services and business services verticals. According to the meeting minutes from 14-15 February, CIVC was “in the market” for Fund V yet the pension declined for “various reasons” to participate.
CIVC proposed that the pension sell its stake to another entity that was also investing in Fund V, and the pension fund agreed. CIVC picked eight buyers before narrowing the list down to three. The three initial bids were tied, but two potential buyers dropped out when Montana Board of Investments proposed revised pricing.
“Staff was concerned with using the 9/30/16 transaction prices which did not consider the post-election market run up, so we counter offered,” the minutes said. “Two bidders fell out; however, one was open to the revised pricing.”
The LP was offered a one-year deferment but opted for a one-time cash payment, which settled on 31 March. The stake was sold at a premium.
Other investors in Fund IV include Chicago Teachers’ Pension Fund (for an undisclosed amount) and Taiwan-based China Development Industrial Bank (also undisclosed).
The decision not to invest in Fund V could be seen as surprising given the performance of Fund IV. According to Pitchbook’s Global PE & VC Fund Benchmarking Report, which analyses data up to the second quarter of 2016, CIVC Partners Fund IV was generating an internal rate of return of 33.3 percent, making it one of the strongest performing 2008-11 vintage buyout funds under $500 million in size.
CIVC Partners Fund V closed on Tuesday on its hard-cap of $400 million, according to a statement from placement agent Atlantic-Pacific Capital. Fund V has already invested in Masterpiece International, a logistics firm that deals with art and museum pieces, in April 2014, according to a statement from CIVC.
In February Montana Board of Investments announced that it has sold a stake in Montlake Capital II, a 2006-vintage $45.3 million growth capital fund, in the second half of last year. The minutes of the most recent meeting do not reveal the price but confirm that it was sold at a discount.
“Since engaging in secondary transactions, the track record is still overall positive, having yet to lose money,” the minutes noted.
CIVC Partners is a Chicago-based, middle-market focused private equity fund that has raised four funds since its $200 million, 1995-vintage Fund I. It has invested around $1.5 billion in 60 portfolio companies since 1989, according to its website.
Montana Board of Announcements and CIVC Partners did not return requests for comment.