News & Analysis

Lex close to carving out One Equity Partners

The stapled secondaries deal would see Lexington Partners carve out JP Morgan Chase’s private investments arm at a large premium to NAV.

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Lexington Partners is close to paying a 20 percent premium to NAV for a deal that would carve out One Equity Partners (OEP), the private equity arm of JPMorgan Chase, three sources said.

Secondaries Investor understands the deal would be worth over $2 billion, including a staple of up to $1 billion to seed a new fund for the prospective spin-out, according to one source.

Lexington Partners and JP Morgan declined to comment.

It was unclear at press time whether the pricing was high due to competition to win the deal; whether the portfolio of interests was not marked at market value; or whether it was to reflect recent unmarked distributions from the portfolio.

Last June JPMorgan announced its intention to make OEP independent in a statement, stating that OEP would continue to manage $4.5 billion of JPMorgan Chase’s private equity investments.

A Reuters news report last month said the deal, which was not under regulatory pressure to come to market, had stalled after JPMorgan tried to shop its $4.5 billion portfolio of LP fund interests and directs investments with the spin-out.

Several parties had expressed an interest in the deal, including the Canada Pension Plan Investment Board, Coller Capital, Lexington Partners, HarbourVest Partners and Goldman Sachs.

In January 2005, OEP sold a portfolio of 65 partnership interests valued at $950 million to secondary specialists Landmark Partners.

It has invested approximately $9 billion since 2004 to acquire more than 40 companies in defence, chemicals, healthcare, technology, travel and manufacturing, according to PEI data.

OEP has made LP commitments to buyout and venture capital funds in the Western European, North American and Asia Pacific regions, making investments between $50 and $200 million transactions each time, according to PEI Research & Analytics.

One Equity Partners has raised and invested two private equity buyout funds, the 2005-vintage One Equity Partners II and the 2008-vintage One Equity Partners III, both with a target of $3 billion, according to PEI data.