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CIC offers €800m get-out for Apax LPs

In an unusual proposition, the Chinese sovereign wealth fund is offering liquidity to LPs in the €11.2bn Apax Europe VII.

China Investment Corporation, the $200 billion sovereign wealth fund, has offered to invest €800 million into Apax Partners’ latest buyout fund, giving some existing limited partners in the fund a chance to waive their remaining commitments, a source close to the firm has confirmed.

In what would be a ground-breaking deal, CIC would acquire a small minority stake in Apax Partners’ management company and acquire uncalled commitments of up to a total of €800 million from existing LPs. LPs were notified of the offer via a letter seen by the Financial Times.

Apax has invested around 40 percent of its seventh European buyout fund, which closed in 2007.

Nothing has yet been signed, according to the source, who added that the offer is the culmination of more than a year’s negotiations.

As Europe’s largest buyout fund, Apax Europe VII has a wide and diverse investor base, ranging from large North American pension funds, such as California State Teachers’ Retirement System and the Canadian Pension Plan Investment Board, to smaller fund of funds, such as the UK’s Graphite Capital and Switzerland’s Horizon 21.

The plan whereby CIC would relieve some LPs of their future commitments is not driven by liquidity problems, according to the source, but is instead driven by the firm’s recognition that LPs’ needs have changed since commitments were made in 2007.

By partnering with CIC in this way, Apax would reduce the risk of LPs defaulting on their commitments or selling their stakes to an unspecified third party on the secondaries market.

In August 2008 it emerged that Apax was in talks with a trio of sovereign wealth funds including the Australia Government Future Fund and the Government of Singapore Investment Corporation (GIC) to sell a stake in its management company. These two funds ultimately bought a combined stake of 7.7 percent in Apax Partners.

Apax declined to comment.

Amanda Janis contributed to this report