Under pressure to strike a deal that could ward off a £1 billion ($1.3 billion; €1.2 billion) unsolicited bid from HarbourVest Partners, SVG Capital said late on Tuesday that it has agreed “in principle” to sell 50 percent of its portfolio to a pair of bidders, Pomona Capital and Pantheon Ventures, for £379 million.
At 1pm UK time on Thursday 6 October, HarbourVest will hold a first close for SVG shareholders wishing to accept the Boston-based investment firm’s 650 pence-a-share offer, so time is running short.
Forced to hammer out a deal under strict time constraints, SVG missed its own Tuesday morning deadline to update shareholders on the outcome of talks concerning a possible rival bid. In an effort to turn up the heat on SVG, HarbourVest released a statement drawing attention to the missed deadline in order to highlight the uncertainty surrounding the alternative bid and the “clarity and certainty” of its offer.
SVG parried with a brief announcement of its plan to sell half its assets to Pomona, a dedicated secondaries firm, and Pantheon, a private equity investor with a significant secondaries business. After the market closed on Tuesday, it provided a lengthier update.
The London-listed private equity investor is proposing to use the proceeds from the sale to launch a £450 million tender offer at 700 pence a share in November of this year.
A further tender offer of at least £300 million, priced at or close to prevailing net asset value, will follow in January or February of 2017, financed using SVG’s capital resources, the realisations from mature funds managed by London-based private equity firm Permira and SVG’s structured products portfolio.
Further offers will be made as investments are sold off and the company is wound down, SVG said.
A spokesman for HarbourVest declined to comment on SVG’s proposals.
SVG’s proposed asset sale, which has not yet been formalised, is “supported by all members of the Board”, SVG chairman Andrew Sykes said in the statement, adding that the plan represents the first step in a process designed to “maximise value for shareholders” and “generate superior value” compared to HarbourVest’s offer.
However, SVG noted, “there can be no certainty” that the proposals will be implemented – nor certainty as to their terms.
The portfolio sale, which SVG says represents a discount of about 7.8 percent to the value of these assets as at 31 July, is dependent on several criteria, including the completion of due diligence on the part of the potential buyers, the lapse or withdrawal of HarbourVest’s offer, and the approval of shareholders, who will be invited to a meeting in early December 2016.
And while the board expects most of the cash from these offers to be returned to shareholders in the first half of 2017, with the wind-down of the company due to occur by the end of 2017, these events are subject to “execution and market risks”, SVG said.
Another issue to consider is costs: SVG said it expects the expenses from responding to HarbourVest’s unsolicited bid, implementing the tender offers, and winding down the company to add up to about £33 million, or 21 pence a share.
SVG’s shares closed 0.88 percent lower on Tuesday at 674 pence.
New York-based Pomona Capital is ranked twentieth in PEI sister title Secondaries Investor’s SI 30, a ranking of the world’s top secondaries fund managers by capital raised over a five-year period; Pantheon Ventures is ranked twelfth. Pomona has raised $1.85 billion since 2011, while Pantheon has raised more than $3 billion.
– This story was updated with details of the proposed deal with Pomona and Pantheon.