Candover fund elicits strong response

European buyout firm Candover has just held first close on its latest fund four months after launch, raising €2.3bn from the market. This is more than 75% of the €3bn target that was announced for Candover 2005 at its launch in April.

The firm has also notched up two exits for the predecessor Candover 2001 fund. Along with co-investor Cinven, Candover sold part of its stake in bingo operator Gala to Permira. The firm also sold Swissport International, an aviation service group, to trade buyer Ferrovial for SFr1bn.

Some 85% of investments in Candover 2005 were secured from existing investors, sources close to the firm said. These included a €400m commitment from Candover Investments under a co-investment agreement. The 2001 fund was pegged at €2.7bn, of which €900m has been realised.

Candover has also pinned down a partial realisation of its equity holding in Gala. The bingo operator has been touted as an IPO candidate, but news of a potential sale to Permira emerged three weeks ago.

Proceeds from the transaction and an earlier refinancing of the company have delivered a cash return of 1.3x their investment for Candover and Cinven to date. The sale, which also involves a refinancing of the company’s debt, saw Permira pay £200m to become an equal owner of Gala, which is valued at £1.89bn. Candover and Cinven bought the company for £1.24bn in March 2003.

The move ended the plan to list the company in September through Deutsche, Merrill Lynch and UBS. Bankers believe the company will eventually return to market, however. Permira had also been an admirer of Gala. It lost out to Candover and Cinven in the 2003 auction of the company.

Candover has, meanwhile, notched up a 2.6x return on the sale of Swissport. Under the firm’s ownership, Swissport has played a role in the consolidation of the global aviation services industry and has expanded sales by 25%.

The sale of Swissport and the partial recapitalisation of Gala will result in an increase of 77p per share in the unaudited net asset value of Candover Investments PLC as at June 30 2005.

Ferrovial, one of the world’s largest infrastructure and services companies, is buying Swissport for an enterprise value of SFr1bn (€646m).

Candover led the €393m buyout of Swissport from the former SAirGroup in February 2002, backing the management team in the wake of the events of 9/11 and the administration of Swiss Air. Since then, Swissport has made a number of significant acquisitions, including CSC, the world’s largest independent cargo handler, and Groundstar, the UK’s leading handler of low cost airlines.

During the period of its investment in Swissport, Candover found itself in a situation with which Texas Pacific Group can currently identify. TPG’s Gate Gourmet airline catering investment is hovering on the brink of administration, which is where Swissport was about a year ago. As airline margins have become slimmer, the pressure to outsource more services has become greater, sparking a wave of consolidation in the logistics companies that provide these services. °