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Categorized | Financial

Schroders backs SVG after HarbourVest bid


Posted on September 20, 2016

A Schroders sign is seen outside a building in the City of London...A Schroders sign is seen outside a building in the City of London March 22, 2013. Two of the City of London's oldest names could merge after fund manager Schroders said it was in talks to buy smaller rival Cazenove Capital. Schroders said in a statement on Friday it was considering a cash offer for Cazenove, which manages 18.7 billion pounds ($28.39 billion) in assets. REUTERS/Toby Melville (BRITAIN - Tags: BUSINESS EMPLOYMENT)©Reuters

SVG Capital’s second-largest shareholder has thrown its weight behind the UK private equity group’s management team, just one week after US umbrella fund HarbourVest Partners made an unsolicited £1bn bid for the business.

On Tuesday, blue-chip UK fund manager Schroders, which has an 11.35 per cent holding according to Bloomberg, said it is “supportive” of SVG management — despite having sold just over 1m SVG shares last week after they rose to HarbourVest’s offer price of 650p a share.

    “Schroders continues to be supportive of the SVG management,” Schroders said on Tuesday, explaining that the share sale was “necessary to meet cash-flow obligations”.

    “We are required to deal as necessary to meet cash-flow obligations for our funds but this has no bearing on our ongoing support for the business,” it added.

    Last Friday, Lynn Fordham, chief executive of SVG, rejected HarbourVest’s offer, arguing that the Boston-based group’s 650p-per-share bid “undervalues the company and its assets”. She said SVG’s board was focused on “delivering maximum value to its shareholders”.

    Ms Fordham added that SVG had “received approaches from a number of credible parties, which the board believes may lead to an offer competing with HarbourVest and could deliver SVG Capital shareholders superior value”.

    SVG, which was spun out of the private equity arm of Schroders in 1996, was historically the biggest investor in funds run by Permira, the European buyout group. But it diversified its approach after a sharp drop in the value of its Permira investments in 2008 forced it to launch a rights issue.

    But despite delivering consistent growth since the strategy shift, SVG has repeatedly come under pressure from shareholders.

    Coller Capital, one of the world’s leading investors in second-hand private equity interests, became SVG’s largest shareholder in 2009. While Coller remains SVG’s biggest investor, holding more than 26 per cent of the company, it has put forward multiple resolutions to oust Ms Fordham. In 2012, Coller even called for SVG to be wound down, with cash returned to shareholders.

    Coller has irrevocably backed HarbourVest’s bid, and HarbourVest recently bought an 8.5 per cent stake in SVG.

    Other shareholders with a combined 22.7 per cent stake, including Aviva, Old Mutual and Legal & General, have signed non-binding letters of intent to back the bid.

    11.35%

    Schroders’ holding in SVG Capital, according to Bloomberg

    However, analysts have warned that some shareholders may reconsider their support for HarbourVest and hold out for a counterbid.

    “For larger shareholders, even those that have signed letters of intent, we believe that it makes sense to wait and see if a higher bid arises,” said Simon Elliott, an analyst at Winterflood Capital.

    SVG said on Tuesday that the company was continuing to hold discussions “with a number of credible parties”.

    HarbourVest declined to comment.