Shares in SVG Capital have soared following news that the London-listed fund of funds will implement a change of strategy, which will distribute up to £170m to its shareholders and diversify its current portfolio beyond funds managed by European buy-out firm Permira.
In a statement released today, SVG said it would return up to £170m to shareholders via share buy-backs and tender offers. The group pledged an initial capital return of up to £50m through a tender offer which will be boosted by share buy-backs.
Shares in the group have surged 22.05 per cent to 201.5p, up 36.40p from yesterday’s closing price of 165.10p.
Although the firm indicated that its longstanding relationship with Permira remained important and would continue, it plans to build on its Permira portfolio through commitments to funds managed by a limited number of other managers focused on management buy-outs and buy-ins, and will make co-investments alongside funds.
Second quarter results released in August revealed that SVG’s portfolio was dominated primarily by funds advised by Permira, which represented 97.4 per cent of the firm’s private equity funds portfolio and 82 per cent of its total investment portfolio.
Lynn Fordham, CEO of SVG Capital, said, “Since we published our interim results in August we have consulted with our major shareholders and advisors and have considered carefully the best course for us to take to maximise shareholder returns over both the short and longer term. The investment strategy we are laying out today recognises our recent successes, the current challenging market environment and the significant future opportunity for SVG Capital in a capital constrained environment.
“We have a strong belief in the quality of our assets. In the short term our £170m capital return programme will improve shareholder returns, whilst our proposal to evolve from a single manager concentrated investor to a strategy of committing to a limited number of private equity managers and co-investments alongside these managers in the future opens up new opportunities for our investors,” she added.
The move follows a slew of problems for SVG Capital stemming from the Lehman shock in 2008. Earlier this year the firm was forced to cut the value of its indirect holding in ailing UK retailer New Look in half, reflecting efforts to slash holdings in Permira funds in a bid to repair its balance sheet.
Despite the issues facing the firm, Fordham announced in August that the firm remained committed to private equity, and believes the asset class, with its longer term investment horizon and strong alignment of interest, will continue to outperform public markets.
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