Kleinwort Development Fund (the UK listed private equity investment trust), its managers and Dresdner Kleinwort Benson Private Equity have formed a joint venture called Kleinwort Capital Limited. Kleinwort Capital Limited will manage the Kleinwort Development Fund, which was previously managed by Dresdner Kleinwort Benson Private Equity.
Kleinwort Development Fund has half its assets in cash and will commit that cash a sum of GBP50 million to Kleinwort Capital Partners IV. Kleinwort Capital Partners IV, like Kleinwort Development Fund, is managed by Kleinwort Capital Limited. Kleinwort Capital Limited won both these management contracts and all of Dresdner Kleinwort Benson Private Equity existing fund management obligations when it was formed by Kleinwort Development Fund and Dresdner Kleinwort Benson Private Equity.
Kleinwort Development Fund’s rationale in setting up the joint venture is to gain in 50 per cent of the profits of its management company plus a share in the carried interest of funds such as Kleinwort Capital Partners IV, which has just been launched. In addition to Kleinwort Development Fund’s GBP50 million, Kleinwort Capital Partners IV will also get GBP50 million from Dresdner. It’s hoped this fund will eventually raise GBP200 million. The fund, like Kleinwort Development Fund, invests in UK mid market transactions. Prior to the formation of the Kleinwort Capital Limited joint venture, the management of Kleinwort Development Fund (by Dresdner Kleinwort Benson Private Equity) was done on the basis that Kleinwort Development Fund received co-investment rights alongside Dresdner Kleinwort Benson Private Equity managed funds.
It is hoped that these moves will narrow Kleinwort Development Fund’s discount it’s currently trading at around a 31 per cent discount or a lot more if the cash element of the fund is taken into account.
In addition, Kleinwort Development Fund is to change its name to Kleinwort Capital Trust plc to reflect the closer involvement with its management company and has proposed to sub-divide each existing ordinary share of 25 pence into five new ordinary shares of five pence each to increase liquidity. Also, Andrew Hartley and Richard Green will transfer from Dresdner Kleinwort Wasserstein to Kleinwort Capital Trust plc. Shareholder approval is required for some of these proposals, which are deemed to be related party transactions under the London Stock Exchange’s listing rules. An EGM was held on October 29.