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JPEL acquires GBP56.5m private equity portfolio

JP Morgan Private Equity Limited (JPEL) has entered into a conditional agreement with Private Equity IC Ltd, SPL Private Equity IC Ltd, and SPL Integrated Finance (together, the SPL Funds) to acquire a portfolio of middle-market co-investments in an all-stock acquisition valued at GBP56.5 million or approximately USD91.9 million.

The Co-Investment Portfolio consists of a pool of 38 investments with leading fund managers primarily invested in the UK, Germany and France.

“This Acquisition is part of JPEL’s strategy of continually repositioning its private equity portfolio. Currently, JPEL’s existing portfolio is weighted towards lower-middle market companies and the addition of the Co- Investment Portfolio enables JPEL to gain access to middle market companies managed by leading private equity sponsors,” says Trevor Ash, JPEL’s Chairman. “JPEL anticipates that the Co-Investment Portfolio will provide JPEL with positive growth and distributions from near term exits as well as from potential asset sales. It is likely that any distributions would be reinvested by JPEL in opportunistic secondary investments or distributed to shareholders through JPEL’s tender facility."
Under the terms of the Acquisition, which has been approved by the Board of Directors of both JPEL and the SPL Funds, the Purchase Price of GBP56.5 million will be adjusted for any capital calls or distributions made by the Co-Investment Portfolio between the day on which the Acquisition Agreement was signed and the Closing Date.
The SPL Funds will receive approximately 65% of the Purchase Price, or GBP36.7 million, through the issue of 44,727,053 new USUSD Equity Shares issued at JPEL’s unaudited USUSD Equity NAV per share at 30 June 2011 and 35% of the purchase price or GBP19.8 million through the issue of a new class of 2017 Zero Dividend Preference. Shares (“New 2017 ZDP Shares”). The 30,410,753 New 2017 ZDP Shares issued as a part of the transaction will have a gross redemption yield of 8.25% and will mature on 31 December 2017.
“I believe that this transaction further illustrates JPEL’s unique approach to private equity secondary investing,” adds Ash.
In connection with the Acquisition, JPEL expects to publish a Prospectus later today in respect of the USUSD Equity Shares and New 2017 ZDP Shares to listing on the Official List (premium segment and standard segment, as appropriate) and to trading on the Main Market for listed securities of the London Stock Exchange.
To ensure that all Listing Requirements are fulfilled in relation to the New 2017 ZDP Shares, the SPL Funds are planning to undertake a secondary placing of their New 2017 ZDP Shares (the “Placing”), with all transfers to placees to take place immediately on Admission. In this regard, the SPL Funds have instructed Liberum Capital Limited to use its reasonable endeavours to procure placees for the New 2017 ZDP Shares prior to Admission.
Completion of the Acquisition is subject to a number of conditions including, inter alia, approval of the Acquisition by the shareholders of the SPL Funds. JPEL understands that each of the SPL Funds’ have today sent circulars relating to the Acquisition to shareholders, with the relevant EGMs and shareholder votes expected to be held on 9 September 2011. As a result completion of the Acquisition and Admission are expected to take place simultaneously on or around 12 September 2011.
Conditional on the completion of the Acquisition, The Company and the SPL Funds have also entered into an Economic Transfer Agreement relating to two ownership interests comprised in the Transfer Portfolio. Pursuant to the Economic Transfer Agreement, the Company will retain record and legal ownership of the relevant ownership interests in accordance with the terms of the Acquisition Agreement but will transfer to the SPL Funds all economic rights, benefits and obligations in and to those ownership interests.
JPEL’s Board has further noted that subsequent to the Acquisition, the Company is considering a proposal to offer holders of 2013 ZDP Shares the opportunity in the future to exchange a certain percentage of their shares for 2017 ZDP Shares and will make a further announcement when additional information is available as to whether an exchange offer will in fact be made. The proposed exchange offer would be limited to an amount equal to 40 per cent of the total outstanding 2013 ZDP Shares, notwithstanding a formal rollover or elimination of the entire class as be determined by vote of the Company’s shareholders on or before that date. Liberum Capital Limited is acting as Sponsor to JPEL and Broker to the Placing and Herbert Smith LLP is acting as JPEL’s legal adviser.

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