SVG recommends liquidation, £379m sale to Pantheon, Pomona

The battle between SVG Capital and HarbourVest, which began with the latter's unsolicited takeover bid, has taken a surprise turn, as the board of SVG urged its shareholders to accept a competing offer from Pantheon Ventures and Pomona Capital that would see SVG wound down. The board has agreed in principle to the key commercial terms with Pomona and Pantheon and expects an asset transfer agreement to be signed in the coming weeks, believing the deal will maximise cash returns to shareholders.

Pantheon and Pomona's offer would see them pay £379m for 50% of SVG's investment portfolio, as well as the wind down of its remaining assets. The bid represents a 7.8% discount to the £401m asset value of SVG's portfolio per 31 July 2016, according to the fund-of-funds. In comparison, the discount-to-asset-value SVG claims HarbourVest's bid represents was 16.5%, while HarbourVest claims its bid features a 10.6% discount.

The proposed deal would comprise both SVG's mature and non-mature assets and would see the fund-of-funds firm manage the remaining 50% of its portfolio – valued at around £388m – until its positions have been fully unwound.

SVG would retain the majority of its LP interests in the mature Permira funds, due to their maturity and cashflow profile, while uncalled commitments will fall to around £368m if the deal is accepted.

HarbourVest was quick to react to the offer, saying in a statement: "The SVG Capital proposals begin and end with complexity and conditionality, offer little clarity as to value, are non-binding and carry significant market and execution risk. Many of SVG Capital's assumptions are not borne out through precedent transactions nor do they reflect the commercial realities of the private equity secondaries market."

The suitor added that in its experience, "the costs and timing of executing an orderly winding-up of a vehicle such as SVG Capital would be significantly greater than those set out" in the Pantheon/Pomona offer.

Provided the Pantheon/Pomona deal is accepted by shareholders, SVG plans to tender two share offers. The first in the tender offer series would be for £450m at 700 pence a share, followed by a second in the beginning of 2017 of at least £300m – priced close to the prevailing net-asset-value per share. It is expected to be funded by the distributions from SVG's retained stakes in mature Permira funds.

The deal would see SVG sell 60% of its holdings in the following funds: 2015-vintage AEA VI, 2016-vintage L Catterton VIII, 2014-vintage Permira V, 2014-vintage CCMP Capital Investors III, 2012-vintage Fifth Cinven Fund, 2014-vintage FFL Capital Partners IV and mature Permira vehicle P1234, as well as several structured products. Additionally, it would sell 55% of its co-investment portfolio and 67% of its stake in 2013-vintage Clayton Dubilier & Rice Fund IX.

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• Topics
• LPs
• SVG Capital
• Pantheon Ventures
• HarbourVest