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September 13, 2016

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HarbourVest to make US$1.35b bid for SVG

US private equity firm HarbourVest Partners said it was taking advantage of a weaker pound to make a US$1.35 billion bid for smaller British rival SVG Capital without the backing of its target’s board.

The approach bucks a weaker environment for deal making in Britain, Europe’s largest equity market, as many investors remain on the sidelines waiting for detail about the impact of the country’s vote in June to leave the European Union.

As well as the chance to buy a target more cheaply following a post-vote weakening in the value of the pound, Boston-based HarbourVest said it was attracted by the company’s short-term growth prospects.

HarbourVest said since 2008, the discounted net asset values of London-listed private equity funds were attractive, underpinning its 650 pence (US$8.62) per share offer, a 14.7 percent premium to the stock’s last Friday close that values the firm at 1.02 billion pounds.

Liberum analysts said SVG’s shares have traded at a persistent discount to NAV, like many funds in the private equity sector.

Commenting on the bid, David Atterbury, managing director at US$42 billion HarbourVest, said: “We look forward to a constructive dialogue with the board in order to crystallize the certainty of value, today and in cash, to its shareholders.”

SVG Capital said yesterday in a separate statement that shareholders should take no action until the company publishes its interim results.

“The Board urges its shareholders to take no action at this time as the Company will publish its interim results on Tuesday 20th September. Shareholders will then have the relevant information on the Company and its performance,” it said.

HarbourVest, which has more than US$31 billion committed to newly-formed funds, said yesterday that SVG shareholders collectively holding 42.7 percent of the company’s share capital had already lent their support to the deal.

An investor with 20 percent of SVG shares had provided an irrevocable undertaking to HarbourVest while shareholders with a combined total of 22.7 percent had agreed to accept the offer through letters of intent.

Added to HarbourVest’s own 8.5 percent stake in SVG, the commitments total 51.2 percent of SVG’s existing shares, above the 50 percent needed to secure a deal. As a result, Liberum analysts said it was “highly likely” to succeed.


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