Candover shares jump on ‘much-improved’ health

Shares in Candover Investments, the listed owner and limited partner of private equity firm Candover Partners, jumped by more than 10 percent Monday morning as the firm reported rising portfolio valuations and reduced leverage levels.

“The strategic review and the subsequent restructuring of the firm and the Candover 2008 Fund, together with some timely asset realisations, have all contributed to our much-improved financial health,” said Malcolm Fallen, chief executive officer, in a statement.

Candover’s future was called into question last year when it emerged that the listed vehicle had insufficient liquidity to honour a €1 billion commitment to Candover Partners 2008 fund. The fund – which had by this point raised a further €2 billion in commitments from other LPs – has since had its investment period terminated.

Candover Partners is focusing on its existing portfolio, as well as “exploring options to rebuild investment capacity”, the firm said in its preliminary results statement.

Candover Investments wrote up its NAV per share by 15.1 percent to £10.38, compared to £9.02 in June 2009. The NAV has actually increased by 1.2 percent compared to December 2008, the firm said.

In terms of liquidity, Candover Investments' outstanding commitment to the 2005 fund – amounting to around £80.8 million – is more than twice covered by cash and undrawn bank facilities.

Two significant exits during 2009 helped alleviate Candover Investments' position. The sale of Wood Mackenzie, a services provider to the energy industry, to London-based private equity firm Charterhouse Capital netted Candover a multiple of 2.7x and an IRR of 56 percent. The more recent sale of Springer Science+Business Media, a publisher of academic and business products, to Nordic firm EQT and Singaporean sovereign wealth fund GIC, generated a 1.8x multiple and an IRR of 28 percent.

Having jumped by more than 10 percent in the day’s trading, shares in Candover Investments were by press time trading at $5.71, up 7.33 percent from their opening price of £5.57.

Oriel Securities maintained a “Buy” rating for the shares, with a target price of £6.20, in a note this morning, saying: “This represents a 40 percent discount to the 31 December 2009 NAV. We believe that a relatively wide discount continues to be appropriate, given the relatively high risk nature of the concentrated portfolio and leverage on Candover's balance sheet.”