LPs continue to fuel private equity

Bain Capital Europe, the European subsidiary of the US buyout house, has defied increasing woes in the debt markets by closing a €3.5bn fund, more than three times the size of its €1bn predecessor raised in 2004.

The move follows news that Charterhouse Capital Partners, a London-based private equity firm, has surpassed the 75% investment level for its eighth fund, which raised €4bn in 2006, and is now on the fundraising trail with a target of €5bn (US$7.8bn).

A target of €5bn would put Charterhouse on par with Bridgepoint, which is also chasing a €5bn target, with expectations of a close later this year. However, the two are eclipsed by CVC Capital Partners, which is reportedly in discussions with institutional investors to raise €12.1bn, which would be Europe’s largest ever buyout fund.

Limited partners at the recent EVCA Investors’ Forum in Geneva were broadly positive regarding private equity in the medium and long term, while acknowledging that the next 12 to 18 months would be both tough and uncertain.

Despite speaking behind closed doors, Sandra Robertson, chief investment officer at Oxford University Asset Management and chairwoman of the forum, noted that many LPs had said that they would continue to increase their commitments to private equity in both percentage terms and dollar/euro amounts.

Bain Capital Europe, headed by Dwight Poler, who was recently selected by Sir David Walker to serve on the Walker Commission panel, confirmed the closing but did not provide any further details on the fundraising. The firm’s debut European vehicle raised €750m in 2000.

Despite having a smaller fund than the likes of Cinven, which raised €6.5bn in 2006, or Permira, which raised €10.1bn in 2007, Bain Capital has made several large bets in Europe, including UK catering supplier Brakes, bought in 2007 for €1.6bn, and German cable group ProSiebenSat.1, bought as part of a Haim Saban-led consortium for €525m in 2003 before being sold to Permira and US buyout house Kohlberg Kravis Roberts for €3.1bn last year.

Bain Capital has also been linked with a number of large European assets, including the race for UK supermarket chain J Sainsbury in partnership with TPG Capital; Turkish retailer Migros, which eventually went to BC Partners earlier this year for US$1.6bn; and the logistics division of Dutch postal group TNT in 2006 before being outbid by Apollo Management, which paid US$1.48bn.

In 2006, Bain Capital was understood to have agreed to have entered exclusive negotiations with Caudwell Group, a UK mobile telephony group, alongside Doughty Hanson before pulling out of the deal, at which point Providence Equity Partners allied with Doughty for a £1bn buyout.

Charterhouse is also understood to be out marketing its ninth fund, although the firm declined to comment. Earlier this month, Charterhouse bought Tunstall Group, a provider of telecare systems for the elderly and inform, in a £514m secondary buyout from pan-European buyout house Bridgepoint. In the same week, Charterhouse acquired Giles Group, a commercial insurance business, for an undisclosed sum.

The two transactions were initially reported to have totalled in excess of £550m but could be up to £700m and are understood to have taken Fund VIII past the 75% level at which the firm can begin marketing a new vehicle.

Fund VIII’s other investments include French shoe retailer Vivarte, bought from PAI Partners for €3.5bn in mid-2007; ista, a German utilities group, purchased from CVC in 2006 for €2.4bn; and Coral Eurobet, a UK bookmaker sold to Candover, Cinven and Permira-owned bingo operator Gala for £2.18bn.