Partners Group Private Equity (PEY) is to launch its first share buyback programme in over 11 years this month in response to its chronic 22% share price discount.
Following the sales in July of PCI Pharma Services, its largest investment, and Techem, its seventh largest investment, the £740m investment company says distributions this year will exceed last year’s €140m (£121m), enabling it to lift the budget for buybacks from €2.7m to €15m (£13m).
Under the capital allocation policy adopted in March 2024, the company, which invests in the private equity funds of Swiss manager Partners Group, had marginal free cash flow at 30 September of €5.4m (£4.7m). It paid a €25.9m (£22.4m) dividend in June and expects to do the same in December.
Last year it made a 10% return for shareholders on the back of 11.4% growth in the portfolio. Over five years it ranks third from bottom out of 15 listed private equity funds with a total shareholder return of 39.7%. The sector average is 255% reflecting the outsized 374% return from 3i Group (III).
Our view
Matthew Read, senior analyst at QuotedData, said: “PEY’s board promised action on the discount back in August and we are now seeing it. While some may say this development is overdue, it is still significant and shows the board is willing to use the investment company’s strengthened balance sheet to target the stubborn discount to net asset value, which remains in excess of 20%. The planned uplift in the potential buyback size, from just €2.7m to as much as €15m, is clearly helpful, but the question still remains as to whether this will be enough to really shift the dial?
“This announcement comes at a time when portfolio realisations seem to be picking up again – helped by the disposals of PCI Pharma Services and Techem – and, with the investment manager expecting 2025 distributions to exceed the €140m received in 2024, there could be room to increase the level of buybacks.
“In the meantime, shareholders are getting 5% of the year-end NAV in the form of a dividend, so are being paid to wait.”
