Dresdner Sells Stake In Kleinwort

In what may be the final deal of one of the largest secondary sell-offs in private equity history, Dresdner Kleinwort Wasserstein (DKW) sold its stake in Kleinwort Capital’s Kleinwort Capital Partners IV to Partners Group and F&C Private Equity Trust.

The two secondary buyers bought DKW’s $104 million (£60 million) commitment to the fund. Baar-Zug, Switzerland-based Partners Group purchased 75% of the commitment and F&C Private Equity Trust acquired 25%. The agreement closed in February. Kleinwort Capital made the announcement during the first week of March.

In a statement released the same day as the acquisition announcement, F&C Private Equity’s chairman said the firm acquired a $26 million (£15 million) commitment from the mid-market fund at an acquisition cost of $5 million (£3 million) and F&C assumed an un-drawn commitment of $14 million (£8 million). F&C says it acquired the assets at a substantial discount.

Last month, Kleinwort Capital announced it changed its name to August Equity. Kleinwort Capital was part of a joint venture with DKW, which has now left. Kleinwort Capital Partners IV closed on $163 million in 2001, according to Thomson Financial (publisher of Buyouts). August Equity focuses on U.K.-based mid-market buyout deals in media, technology, healthcare and specialist manufacturing valued between $17 million (£10 million) and $173 million (£100 million).

Andrew Hartley, a managing director with August Equity, says his firm put the buyer and seller together in a process that “was not quite an auction.” He says that the negotiation for the secondary buy had to be conducted on an amicable basis in order to get the right price. “We had to get the stars in alignment,” he says.

London’s Newgate Partners helped advise the transaction. DKW entered final negotiations with Partners Group and F&C during the final quarter of 2005. “Dresdner were good enough to be patient and allow a process to happen when the right investors did come along. That took a while but in the end you had a willing buyer and willing seller and we were in the middle willing to match make,” says Hartley. “For us it’s very positive news and allows Dresdner a graceful exit.”

DKW is a unit of Dresdner Bank, which is wholly owned by Munich-based Allianz, and has been shedding its private equity assets steadily since 2002. It consolidated much of its private equity holdings, including its stake in Kleinwort Capital Partners IV, into its Institutional Restructuring Unit (IRU).

Last March, Dresdner Bank, and AIG Global Investment Group (AIGGIG) announced that AIG acquired most of the private equity assets of Dresdner’s IRU, which contained approximately $1.4 billion in original commitments. While no price on the transaction was disclosed, AIG announced in mid February that it had a third and final close on AIG PineStar Capital with $700 million (see Buyouts, March 6, 2006).

Early last year, Washington, D.C.-based private equity firm Darby Overseas Investments announced that it purchased the general partnership of the Dresdner Kleinwort Benson Emerging Europe Fund. The fund closed in 2000 with capital commitments of $220.6 million. In 2004, Dresdner closed a $90 million deal with Coller Capital for a 22-company venture portfolio. The deal was a management spinout with former Dresdner investment professionals managing the assets independently as Annex Capital with Coller serving as a limited partner.

F&C Private Equity Trust is the private equity group of F&C Asset Management, a publicly-traded European financial group that manages approximately $227 billion (£131 billion) in assets. It also acquired a $5 million position in Brown Brothers Harriman’s 1818 Mezzanine Fund II for $1.3 million.

August Equity has approximately $519 million (£300 million) under management. Its portfolio companies include London-based data and network services provider European Telecommunications & Technology and Cleator, England-based hat manufacturer Kangol. —M.S.