US private equity group HarbourVest Partners is not giving up on a bid to buy SVG Capital — even after its UK rival rejected its £1bn offer and instead proposed winding down its business and selling half of its portfolio to rival managers Pomona Capital and Pantheon Ventures.
On Wednesday, HarbourVest managing director David Atterbury urged SVG shareholders to accept his group’s bid “without delay”, arguing that the all-cash offer “provides superior cash value in the immediate term, and certainty”.
Boston-based HarbourVest, which has $42bn under management, first made an unsolicited, all-cash offer for SVG last month, valuing the UK private equity group at 650p per share — a 14.7 per cent premium to the London-listed group’s closing price before the bid.
But the bid, which HarbourVest said was final, was swiftly rejected by SVG chief executive Lynn Fordham, who claimed last month that it undervalued the company and its assets.
She also said at the time that SVG had received several other approaches that had the potential to be “more attractive”, and the company was focused on “delivering maximum value to its shareholders”.
On Monday, SVG revealed that Goldman Sachs and the Canada Pension Plan Investment Board were among a group of investors considering a joint bid.
However, on Tuesday, SVG’s board instead proposed winding the company down and selling half of its investment portfolio to rival fund managers Pomona Capital and Pantheon Ventures — making no mention of Goldman or CPPIB.
SVG said it had agreed “key commercial terms” for a sale of holdings to Pomona and Pantheon for £379m — a price that represents a 7.8 per cent discount to their next asset value at the end of July, on a constant currency basis.
It explained that this sale would be followed by a winding-down of the company through a £450m tender offer before year-end at 700p per share — a 5 per cent discount to stated net asset value — and a further £300m tender offer at the prevailing net asset value early in 2017. Further tender offers would be made as investments were sold, the company said.
Schroders, SVG’s second-largest shareholder with an 11 per cent stake, has since come out in favour of the new plan. On Wednesday, a spokesperson said: “We are supportive of the SVG board’s efforts to maximise value for shareholders with the proposed transaction and the plan to wind-up the company.” SVG was spun out of the private equity arm of Schroders in 1996.
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But HarbourVest’s Mr Atterbury dismissed SVG’s proposals, saying they “begin and end with complexity, and conditionality, offer little clarity as to value, are non-binding and carry significant market and execution risk”.
“Many of SVG Capital’s assumptions are not borne out through precedent transactions nor do they reflect the commercial realities of the private equity secondaries market,” he said, adding that “no assurance can be given as to the initial sale of the investment portfolio or the value of the residual portfolio”.
Pantheon and Pomona, meanwhile, issued a separate joint statement, saying they had “enthusiasm for the potential of the [SVG portfolio] transaction”.
SVG shareholders have until Thursday afternoon to accept HarbourVest’s bid. However, the company can request an extension under the UK Takeover Code, which would move the deadline for shareholders’ approval to mid-November.
So far, SVG’s largest shareholder, Coller Capital with a 26 per cent stake, 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 650p-per-share offer.
Shares in SVG fell more than 3 per cent in the first hour of trading on Wednesday, to 652p per share.