Apax Partners, the UK private equity firm originally founded by Sir Ronald Cohen, is in advanced negotiations with three sovereign wealth funds to sell a 10 percent stake in itself. The three prospective investors are The Australia Government Future Fund, the Government of Singapore Investment Corporation (GIC) and Japanese financial services group Takefuji Corp. The deal, first reported in UK newspaper The Times, would reportedly value Apax at around £1.5 billion ($2.8 billion; €1.9 billion).
A source close to the situation told sister news site PrivateEquityOnline that negotiations are ongoing and that it was impossible to say when a successful outcome would be reached. Apax declined to comment on the reports.
The Australia Government Future Fund is a A$60 billion ($52 billion; €35 billion) investment fund, set up in 2006 with the aim of financing future civil service pension liabilities. The acquisition of the stake in Apax would represent a distinct shift in the fund's portfolio mix. At the end of the last quarter, it was 18.9 percent invested in international equities, 8.6 percent in Australian equities and 67.4 percent of its assets were still in cash, with a negligible amount dedicated to private equity.
GIC is the largest sovereign wealth fund in Asia with assets totaling around $330 billion. It is an active investor in Western financial services companies, having spent a total of $18 billion buying stakes in UBS and Citigroup since December 2007. GIC may also commit $2 billion to $3 billion in capital to TPG's new $6 billion vehicle dedicated to troubled companies, according to the Financial Times, citing sources close to the matter. GIC will serve as lead investor for the fund, after committing a reported $1.5 billion in December of last year to the firm's $15 billion mega fund that has yet to close.
Stephen Schwarzman, The Blackstone Group's chairman and chief executive, defended sovereign wealth funds as “model investors” at January's World Economic Forum in Davos, after China's Government Investment Corporation bought a 9.9 percent stake in Blackstone for $3 billion ahead of the firm's initial public listing in June 2007. In July 2007 the Abu Dhabi Investment Authority acquired an undisclosed stake in US group Apollo Management. The government of Abu Dhabi also acquired a 7.5 percent stake in The Carlyle Group.
Shanghai to give foreign investors local status
Shanghai will allow foreign investors to register as local equities investment firms, according to a government document obtained by Reuters. Foreign investors, including private equity funds, venture capital funds, and hedge funds, with a focus on Chinese equities will be able to set up a Shanghai-registered entity with initial capital of RMB 100 million ($14.56 million; €9.91 million) or more with the legal status of a local investment company and receive special tax treatment, according to the document. “With the rapid growth of China's economy and expansion of domestic capital markets, private equity and other funds are also growing fast and helping companies to increase their value,” the document reportedly said. The change helps to put foreign firms on more equal footing with China's growing domestic alternative asset industry. Currently, foreign investment firms in China typically register as consultants or representative offices.
LDC shifts management roles
London-based Lloyds TSB Development Capital (LDC), the venture arm of Lloyds TSB, has tapped Jon Andrew, investment director for three years, to assume the role of chief operating officer. Andrew, who also spearheaded LDC's value enhancement group, aimed at growing portfolio companies' value, replaces Candida Morley in the role of COO. Morley moved into a newly created position – chief portfolio officer. In that role, she is responsible for LDC's “value enhancement activities,” according to a statement. Those duties include overseeing the firm's turnaround teams and the value enhancement group. In its most recent transaction, LDC exited its investment in business travel management company ATP International Group through a £73.5m secondary backed by Barclays Private Equity.
Apollo's Harrah's gamble marked down
Listed investment vehicle Apollo Alternative Assets, which invests in and co-invests with Apollo Global Management's private equity and capital markets investments funds, has marked down by 25 percent its co-investment in casino operator Harrah's Entertainment. The investment in Harrah's was valued at $179.5 million on 31 March this year and was marked down to $134.3 million (€91 million) just three months later. Fair value as a percentage of net assets also dropped to 6.8 percent from 8.8 percent. In the three months to the end of June 2008, Harrah's reported revenues of $2 billion, a 3.7 percent decrease from the same period in 2007. Adjusted EBITDA dropped 20.6 percent year over the year from $534.2 million to $424.2 million. Apollo and TPG agreed to acquire Harrah's for $17.1 billion, or $90 per share, in January 2007. The deal, which closed in January this year, included $3 billion of equity including $1.3 billion from Apollo. With the assumption of approximately $10.7 billion in debt, the total transaction price was around $27.8 billion.