High-end suit maker Hugo Boss, a portfolio company of London-based Permira Advisers LLP, has worked out a deal with a union that will keep open its only U.S. plant, which had been scheduled for shutdown in April. Some of Permira’s limited partners had strongly objected to the closing in letters to the general partner.
“Those letters had no bearing on the decision to keep the plant open,” a company spokesman told Buyouts. Hugo Boss and the union reached a settlement through negotiations that resulted in a proposal that met the company’s economic goals, he added.
In April, Peter Franchot, Maryland’s comptroller, wrote to Permira stating, in part, that the planned factory closing was “troubling when one considers that Hugo Boss is a portfolio company of Permira Advisers, a private-equity firm that counts state pension systems among its largest institutional investors. I do not believe it’s appropriate for a firm such as Permira, whose funds are largely sustained by taxpayer dollars, to initiate or condone actions that could further compromise the health of our economy and jeopardize the value of the public’s investments in your funds.” The Maryland State Retirement and Pension System is an LP of the fund.
The previous month, executives of the Ohio Public Employees Retirement System wrote to Permira Advisers expressing concern over the shuttering of the factory, which is located in Brooklyn, Ohio. The letter said, in part, that due to what it considered the poor performance of the fund and a lack of good faith bargaining in trying to keep the plant open, the “board now has concerns about future involvement with your institution.”
Meantime, John Liu, New York City’s comptroller, echoed the concern over performance, noting in a letter that “Permira IV has underperformed” and that “the Hugo Boss situation only compounds our concerns about the handling of Permira IV.” Liu oversees the city’s pension funds, two of which, the New York City Police Pension Fund and the New York City Fire Department Pension Fund, are backers of Permira IV. After the decision to keep the plant open, the comptroller’s spokesperson told Buyouts, “We’re appreciative that Permira was responsive to our deep concerns.”
As of Sept. 30, 2009, data from the California State Teachers’ Retirement System shows Permira IV generating an IRR of –36.45 percent. Permira’s other LPs include the California Public Employees’ Retirement System; the Massachusetts Pension Reserves Investment Management Board; the Pennsylvania Public School Employees’ Retirement System; the Pennsylvania State Employees’ Retirement System; and the Washington State Investment Board.
In November 2008, Permira allowed LPs to cap their pledges to Permira IV at 60 percent. Fund IV closed with €11 billion ($14.5 billion) in 2006, more than double the size of the firm’s vintage 2003 fund. About 10 percent of LPs reduced their pledges, bringing the total pool to €9.6 billion.