Two partial disposals of top-10 holdings should leave the Swiss-run private equity fund with sufficient cash to start share buybacks, say analysts.
Partners Group Private Equity has sold down two top 10 investments, paving the way for the start of much-needed share buybacks under its new capital allocation policy announced four months ago.
Euro shares (PEY) in the £672m investment company edged 0.8% to €9.80 higher on Tuesday, slightly narrowing their 28% discount, but the sterling (PEYS) share class dipped 0.3% to 844p after its Swiss fund manager, Partners Group, agreed a sale and reinvestment in PCI Pharma and Techem Metering that will reduce its stakes in both.
Partners Group has sold a nine-year majority stake in PCI, a US drugs contract manufacturer that was the closed-end fund’s second largest holding at 8.7% of assets, to Bain Capital and Kohlberg & Co. The reportedly $10bn valuation was in line with PEY’s €83m carrying value in May.
The re-sale of Techem, a German provider of real estate management services, including building efficiency, to a consortium led by Partners Group that included Singapore sovereign wealth fund GIC, TPG Rise Climate, and Mubadala Investment Company of Abu Dhabi, was also in line with the trust’s €39m stake, making it the seventh biggest position in May.
PEY will reduce its exposure to Techem and reinvest €18m to participate in its future growth predicated on helping the global real estate sector decarbonise.
Analysts at Deutsche Numis, a joint corporate broker of the company, estimated around €8m would be left from both transactions for buying back the undervalued shares.
Under the capital allocation announced in March, the private equity fund agreed to distribute half of net cash to shareholders in addition to the semi-annual dividends the 7.5%-yielder pays.
Numis analyst Gavin Trodd said: “In addition there is scope for additional cash being returned to shareholders through the potential reduction of listed holdings.”
The company holds around 13% in listed companies, the largest of which, India retail platform Vishal Mega Mart, it sold over a quarter in June to provide funds for potential share buybacks.
PEY was the latest deeply discounted listed private equity fund to revamp capital allocation policy. The announcement followed a period of engagement by activist Asset Value Investors, which holds nearly 20% of the company, half through its flagship AVI Global Trust (AGT).
AVI invested after the 2022 shock dividend suspension when the former Princess Private Equity was hit by a surge in costs hedging the euro, its base currency, against the dollar.
A year ago the euro PEY shares passed their pre-dividend suspension high of €11.50 but have since fallen to €9.80. The more recently introduced sterling shares have also languished, generating a meagre 0.9% total return including dividends over three years, according to Deutsche Numis data. Longer term, figures from the Association of Investment Companies show a 126% return in sterling from the euro share class, ranking it 10th out of 15 private equity funds.
