Coller sweeps up Lloyds unit in £480m deal
BUYOUT house Coller Capital plans to inject £100m fresh capital into Lloyds Banking Group’s private equity portfolio after buying a controlling share in the assets, valuing them at £480m.
Coller yesterday paid £332m in cash for a 70 per cent share in Lloyds’ Integrated Finance unit, which comprises equity and debt stakes in 40 companies. Lloyds, which inherited the operation when it took over Halifax Bank of Scotland in 2008, will retain a 30 per cent holding.
Integrated Finance was assembled by Peter Cummings, the disgraced former head of corporate banking at HBOS, and includes minority stakes in well-known businesses such as Vue Entertainment and David Lloyd Leisure. The price agreed by Coller yesterday represents a fraction of the £1.4bn Cummings’ team paid for the assets at the top of the market.
The entire portfolio will be transferred to a new joint venture between Coller and Lloyds called Cavendish Square Partners. Lloyds will keep responsibility for providing senior debt to the companies, while Coller will acquire a combination of loan notes and senior equity.
Coller said the project would continue to be managed by Graeme Shankland, Cummings’ right-hand man and the co-architect of Integrated Finance. Shankland has been asked to squeeze value from the investments and look for orderly exits for Coller and Lloyds over time.
Tim Jones, a partner at Coller, suggested some companies could be put up for sale quickly. He said: “Some of them are in a very good state. [Engineering firm] PSN is a great business, Vue is a great business, David Lloyd is a good business. Those companies could be sold off at any time within reason.”
Coller has decided to invest a further £100m in the portfolio. Jones said the cash would help the companies make small bolt-on purchases and fix up their balance sheets.
PETER
CUMMINGS
FORMER HEAD OF HBOS CORPORATE
INTEGRATED Finance is a relic of the disastrous empire created by Peter Cummings, former head of corporate at Halifax Bank of Scotland.
The Scottish financier earned infamy for continuing to lend billions of pounds to commercial property and retail tycoons such as Robert Tchenguiz, the Reuben brothers and Sir Tom Hunter even as the economy fell into recession. The Integrated Finance portfolio bought by Coller Capital is free from toxic real estate investments, but its roots are no less controversial.
The unit took equity stakes in companies to which the bank was also lending, a practice known as “pig-on-pork”. Integrated Finance is frowned upon because bankers’ judgement of a firm’s credit risk can be clouded by the promise of attractive returns on the equity side.
Nonetheless, Coller believes it can extract value from the portfolio’s stronger holdings. The secondary buyout specialist first ran its eye over the outfit before HBOS was taken over by Lloyds Banking Group. Shortly after Lloyds put the portfolio up for sale in January, Coller muscled out other parties including 3i, Advent International and Bridgepoint to become the preferred bidder.
Lloyds was advised on the sale by a team from UBS led by Nigel Dawn, Gerald Cooper and Chris Fox.