The last of the 1997 mega-funds, The Candover 1997 Fund, closed in December on GBP850 million (ecu 1.28 billion). One of the largest funds in Europe after the $2.5 million (ecu 2.3 billion) Doughty Hanson leviathan, the new vehicle will enable Candover Investments to underwrite more than GBP200 million of equity for a single deal.
The 1997 Fund substantially exceeded the GBP650 million target set when marketing began last June, a figure that always appeared conservative in the context of current institutional appetites for European buyout funds. At close to three times the size of its 1994 predecessor, it also dwarfs previous Candover vehicles.
Candover itself committed GBP100 million to the 1997 Fund alongside 56 third-party subscribers, among them Scottish Eastern Investment Trust, Rover Group Pension Scheme, CalPERS, CalSTERS, Private Equity Holding and Alpinvest. Existing investors provided 72% by value of external commitments to the new fund; excluding Candover’s contribution, 51% of the total was drawn from North America, 51% from the UK, 13% from Continental Europe and the balance from the Middle and Far East.
The Candover 1997 Fund is destined for investment in larger buyouts and buy-ins over the next five to six years, primarily in the UK but also in Continental Europe, where Candover is gradually building a presence. A French joint venture, Chevrillon Phillippe Candover, was established last year (EVCJ December 1997/January 1998, page 10), while the group’s most recent German partnership, the LGV-Candover joint venture, dates from 1995. A close relationship also exists with Alpinvest of the Netherlands, an investor in recent Candover funds, which was reinforced when Candover took a stake in the Dutch group on its flotation in mid-1997.
Despite this growing involvement in other European markets, however, Continental investments constitute a relatively small proportion of Candover’s portfolio at present and director Colin Buffin predicts that investments in the rest of Europe will account for less than 20% of Candover’s business five years from now.
Chief executive Stephen Curran’s comment that the vehicle will allow Candover “to take advantage of growing market opportunities, particularly for larger transactions” signals a likely intensification of Candover’s focus on deals at the top end of the market. The group’s largest buyouts of recent years were the GBP626 million Eversholt ROSCO privatisation and the GBP360 million Newmond buyout in 1996. Subsequent transactions include the GBP244 million acquisition of the BBC Home Service transmission business, the GBP110 million CE Heath buyout and Candover’s first French lead, a GBP33 million MBO of refrigeration group MC International from Compagnie Generale des Eaux.
Investors in the 1994 Fund, which is now approximately 70% invested, have seen 75% of drawn down capital returned to date, largely as a result of the realisations of Eversholt Leasing and European Rail Catering, together with the flotation of Nutreco.
The 1997 Fund takes Candover’s funds under management to GBP1.8 billion.