Coller forks out £332m for Lloyds’ BOSIF assets

Secondaries specialist Coller Capital has acquired a majority stake in a portfolio of 40 Bank of Scotland Integrated Finance assets from owner Lloyds Banking Group.

Lloyds Banking Group has sold 40 private equity investments in UK-based companies from its Bank of Scotland Integrated Finance (BOSIF) business to a new joint venture named Cavendish Square Partners. The joint venture will be 70 percent-owned by secondaries specialist Coller Capital and 30 percent by Lloyds.

Coller has paid £332 million (€401 million; $502 million) for its stake in the joint venture, valuing the portfolio as a whole at approximately £480 million. This represents a “small premium to current book value” according to a press release announcing the deal.

“It’s a large portfolio of reasonably mature, very good businesses such as [oil and gas contractor] PSN, [cinema chain] Vue Cinemas and [health and fitness chain] David Lloyd,” Coller partner Tim Jones told “We’ve invested at the bottom end [of the cycle] and it was a fair and reasonable price.”

Jones added that the deal does not include a portfolio of real estate-type investments built up by BOSIF, such as construction firm McCarthy and Stone.

Coller and Lloyds are retaining the BOSIF management team, led by Graeme Shankland, to manage the portfolio going forward. The team was widely criticised in media reports for undertaking an alleged spending spree at the top of the market. At one point, the portfolio being acquired by Coller was estimated to be worth around £1.5 billion.

Jones said the BOSIF team was being kept on for the sake of continuity. “They are the team that the management teams within the portfolio know best,” he said. “So they are in the best position to manage the assets and achieve maximum value. If you seek third-party management for one or two investments that’s ok, but with 40 there’d be room for a lot of disruption.”

According to Jones, the complexity of the deal – due to the large number of assets and establishment of a joint venture – meant that Lloyds had run a “tight process” in terms of who was invited to bid for the assets. Lloyds had set an informal process in motion in 2008, but Jones says a formal sale process did not begin until January this year.

Lloyds, which received a government bailout during the Crisis and is now 41 percent state-owned, was told by the European Commission to sell assets in order to allay competition concerns. The bank says it has sold six businesses over the last year, realising more than £750 million.

Jones said he is confident that “Lloyds won’t be unique by any means” as banks around the world are scrutinising whether to retain or divest private equity portfolios. “The banks will lighten their loads but they are full of very smart people when it comes to selling assets so there won’t be any free lunches,” said Jones.

Coller has been involved in a number of high-profile banking deals over the years, including buying the NatWest private equity business from Royal Bank of Scotland in 2000 and a $900 million portfolio from Abbey National in 2004.

Asked to comment on the general environment for secondary private equity buyers, Jones noted: “There’s pent-up capital that wants to buy and there is a big overhang of assets up for sale. But there’s no such thing as a distressed seller, they’re all smart sellers. And the global economy is fragile, so you have to be very careful.”