NB Private Equity (NBPE), a £676m co-investor in unquoted companies in North America and Europe, attempted to generate some excitement over its shares today as it accelerated buybacks and laid out plans for at least $100m of new investments.
With the shares standing on a wide 26% discount and yielding 4.8%, NBPE signalled its confidence in the portfolio of 71 companies by saying it was ready to expand the $120m, three-year share buyback programme launched in February.
The company, whose assets are managed by Neuberger Berman in New York, has already bought back $37.9m of its cheap shares, adding 33 cents to their net asset value (NAV). It said at the current rate it would use the remaining $82m in the next six to nine months.
If distributions from the portfolio increased and the share price discount remained wide, the board suggested it would continue buying back stock.
With mergers and acquisitions recovering, NBPE has received $165m from the sale of companies and holdings this year, at an aggregate 17% uplift over carrying value. It intends to reinvest at least $100m in a pipeline of attractive mid-life co-investments, conscious that improving growth in the underlying NAV is key to narrowing the share price discount.
In a further sign of confidence, the new allocations will lift investment levels to 105%-110% of NAV compared to 100%-105% previously.
Chair William Maltby said: “The actions we are announcing today underscore the board’s proactive approach to maximising shareholder returns, and reflect the strength of the existing portfolio, the improving outlook and visibility of realisations, as well as Neuberger’s strong pipeline of attractive investment opportunities.
“The board firmly believes that the current share price undervalues the portfolio and its long-term prospects, and remains committed to taking steps that aim to narrow NBPE’s discount and ensure that shareholders benefit more fully from the potential growth in net asset value,” he added.
Despite the wide discount, NBPE shares have returned a total 88% to shareholders over the past five years.
Our view
Matthew Read, QuotedData senior analyst, said: “Although not a panacea, we welcome NB Private Equity Partners board’s decision to accelerate its $120m three-year buyback programme in the face of a persistently wide discount – around 26% at the time of writing. Inevitably, these sorts of discount levels set quite a high bar when allocating between buybacks and future investment that will ultimately drive net asset value (NAV) growth. However, the growth in realisations helps – $165m year-to-date at a 17% uplift to carrying value – and NBPE benefits from a maturing portfolio that could see decent NAV growth should the exit environment continue to improve, which could ultimately reduce the need for buybacks. It is fair to say that NBPE’s growth has lagged peers in recent years although its five-year NAV returns are comparable to the sector median. We think that, if an improvement in realisations comes through that drives underlying returns and convincingly narrows the performance gap between NBPE and its peers, this could go a long way to alleviating its woes.”
