Permira Advisers raised more than $12.8 billion for Europe's biggest buyout fund to counter growing competition from its U.S. rivals, Blackstone Group and Kohlberg Kravis Roberts & Co.
The firm expects to raise an additional $1.3 billion from other investors, Permira partner Charles Sherwood said Tuesday. The company will spend at least 70% of the money in Europe and the remainder in Japan and the U.S.
The fund will give the London-based firm more firepower in a record year for leveraged buyouts as Blackstone, KKR and Texas Pacific Group scour Europe for deals. Permira will be able to spend as much as $1.4 billion in cash on every purchase, Sherwood said. That's more than twice what it could invest with its last fund, a $6.5-billion pool raised in 2003.
"Permira can now underwrite transactions in competition with the biggest funds, whether they're from Europe or the U.S.," said Jonny Maxwell, head of private equity at Edinburgh, Scotland-based Standard Life Investments Ltd., which manages about $4.5 billion in European private equity funds. "They've got a good track record."
Permira and predecessor firm Schroder Ventures Europe returned an annual average of 31% from 1990 through 2005, according to a March report to Permira's investors. That compares with a 7% return for a basket of European stock indexes in the same period. Permira's three previous funds rank among the most profitable in Europe, the firm says.
Permira's new fund, which took about three months to raise, gives the firm money to compete in Europe against "the same competitors we're up against outside Europe: the worldwide funds run by almost exclusively American players," Sherwood said. It puts Permira "in the same broad spectrum as global competitors."
The firm teamed with four other buyout firms in November to buy Danish phone company TDC for $15.3 billion in Europe's biggest leveraged buyout. With a larger fund, Permira will need fewer partners to complete deals of similar size.
"We do have a preference for consortiums of two to four parties rather than much greater than that," Sherwood said. The larger fund "is a way to keep the consortia manageable."
Buyout firms use a combination of their own funds and debt to pay for takeovers. They typically seek to expand companies or improve performance before selling them within five years to other funds or investors through stock offerings.
"Permira is widely regarded as one of the best European buyout funds with a strong track record and substantial realizations over a long period of time," said Liz Mendizabal, a spokeswoman for the Washington State Investment Board, which oversees $69.9 billion of pension and other state funds. The board is investing as much as $130 million in Permira IV.
The firm's 1997 fund returned 84% as of Dec. 31 and its 2000 fund returned 15%, according to the report. The 2003 fund has so far returned 40%. Permira's investments include Britain's Automobile Assn., a provider of roadside assistance, and fashion chain New Look Group.
The firm has spent almost $3 billion in the last 12 months buying stakes in companies such as British betting chain Gala Group Ltd. and Madrid-based retailer Cortefiel. In the same period, it has reaped nearly $4 billion selling assets including German broadcaster Premiere.
Permira received almost 90% of the money for the new fund from investors in its previous one. More than half the money came from Europe, with about a third coming from the U.S., a Permira document said.
The firm initially sought $10.9 billion to $12.5 billion for the fund, SVG Capital, Permira's biggest investor, said in March. London-based SVG is investing almost $5 billion in the new fund.
"This fund puts Permira in a leading position in the market," the firm's chief, Damon Buffini, said in a statement.
Blackstone and KKR, both based in New York, and Fort Worth-based Texas Pacific are each raising more than $14.5 billion and preparing more takeovers in Europe after snapping up companies including vacation resort operator Center Parcs Group and British pub operator Spirit Group Ltd.