Conversus opens $75m share tender offer

Euronext-listed private equity fund Conversus Capital has announced a tender offer for up to $75m of its shares for between $20 and $22 each, in a further attempt to narrow its discount to net asset value.

Investors seem to be expecting the higher price for the offer, to be conducted as a Dutch auction. Conversus’ equity closed on 20 January at $20.90, which was 23% below the per share NAV but slightly higher than the lower price band for the offer.

The discount to NAV is under half the 68% gap at the end of April 2009.

That month the fund managers announced they would all but stop investments and new commitments, and realize the value of the portfolio, applying all its cash to capital calls and expenses, repay debt and eventually return capital to unit holders.

Investors have until 22 February to take part in the tender offer. Including this, Conversus will have bought back from investors up to $105m of shares, or more than 8% of its outstanding equity.

Tim Smith, Conversus’ chief financial officer, said: “With over $350m of net positive portfolio cash flow in 2010 and $75m of net cash on our balance sheet, along with a forecast for significant net cashflow in 2011, Conversus is in a strong liquidity position and will have substantial capital to deploy.

“In light of recent trading discount levels and the repayment of our debt in 2010, today’s tender offer represents the most efficient use of capital for Conversus,” said Conversus Asset Management chief executive Bob Long.

The fund also noted it had broadened its investment remit to include investing in new private equity investments including secondary purchases, direct co-investments and primary commitments.

In separate news, the method of calculating the fees that adviser Conversus Asset Management puts to the fund of private equity funds has changed. The fund expects this to result in lower expenses, from the start of this year.

David Walker

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