Standard Chartered PE: will 2018 be the year it (finally) spins out?

Standard Chartered Private Equity, the private equity arm of Standard Chartered Bank, has been rumoured to be on sale for years.

The London-headquartered bank, which has invested $6 billion across more than 100 companies through the bank’s balance sheet, said in November 2015 it would reduce its private equity business over the next two years and focus on selected investments.

In November last year the unit renewed its spin-out plan and was expecting backing from financial sponsors and asset management platforms where there is “complementarity with the unit”, a source with knowledge of the matter told sister publication Private Equity International at the time.

Fast forward to July and the on-and-off sale and attempts to spin out are ongoing. According to a Bloomberg report in May the bank is seeking investors to buy the remaining $1.5 billion of private equity assets and back a spin-out. The deal includes a team of 55 investment professionals and an emerging markets-heavy portfolio of assets that includes Vietnamese mobile money operator M_Services, South Korea’s Kolon Water and Energy and Chinese health and beauty chain Shanghai Siyanli Industrial Company.

Two Asia market sources PEI spoke with said they wouldn’t be surprised if the sale included a stapled element – where buyers would offer to cash out SCPE’s third-party investors by selling a package of assets of about $500 million on the secondaries market with a similar-sized primary commitment to a new fund, so the unit can spin out.

SCPE has continued to invest in deals amid the sales process. The unit’s latest investment is Travel Boutique Online Group, an Indian B2B travel distribution company, announced in mid-July. SCPE, which typically invests between $40 million and $75 million in companies, did not disclose the financial details. In May it invested in Tat Hong Holdings, a Singapore-based supplier of cranes and heavy equipment. SCPE is also reportedly interested in acquiring a Ugandan soft drinks and biscuits company and is exiting its stake in a unit of construction conglomerate Saudi Binladin Group.

One Hong Kong-based fund of funds manager told PEI that investing during a sale process is not out of the ordinary, as long as there is still investable capital.

“One issue with the sale is that SCPE has been trying to sell it as a single entity, when the portfolio is a collection of different markets,” the manager said. The Asia business could be split from the Africa business, he added.

Meanwhile, a Hong Kong-based placement agent added: “This sale has been going on for too long. With the number of spin-out attempts, it wasn’t clear whether SCPE was really a motivated seller or not, maybe they are now.”

Standard Chartered Private Equity declined to comment on the process. Credit Suisse, the financial advisor to SCPE, could not be reached for comment by press time.

Five spin-outs of note

Tenaya Capital-Lehman Brothers

In February 2009, a HarbourVest-backed management group helped spin out the venture capital arm of Lehman Brothers after the investment bank went bankrupt. It bought the parent’s existing investments and unfunded commitments. In 2012 the firm, now called Tenaya Capital, raised $372 million for its first independent fund.

Equistone Partners Europe-Barclays

Equistone Partners Europe was spun out of Barclays in 2011 by its management team, led by Guillaume Jacqeau. The firm raised its first post-Barclays fund in 2013, collecting €1.5 billion for EPEF IV. The buyout was one of many driven by post-crisis capital requirements which drove the divestment of illiquids.

Ardian-AXA

The firm has grown so big it’s easy to forget that it only spun out in 2013. The deal, valued at €510 million when it was announced, saw what was then known as AXA Private Equity peel away from insurance giant AXA Group. The management team, led by Dominique Senequier, took a 46 percent stake in the new business.

One Equity Partners-JPMorgan

One Equity Partners spun out from JPMorgan in 2015 using a stapled transaction. Secondaries buyer Lexington Partners bought a large chunk of the firm’s portfolio and committed $500 million for the firm to invest as a standalone entity. It closed its first standalone fund in 2015 on $1.65 billion.

Pollen Street-RBS

The RBS spin-out Pollen Street was in the news in February as it closed its first post-spin-out fund on £402 million ($555 million; €452 million), having held a first close in March 2016.The financial-services-focused manager first struck out on its own in 2015 at the second time of asking, after the parent rejected its first attempt.

– Rod James contributed to this report.