Valad considers interest in European arm as MBO fails

Ten firms line up to buy Australian property firm’s European investment manager after shareholders reject management’s £52m buyout offer

Valad is proceeding with a potential sale of its European investment management arm after a management buyout proposal was withdrawn last month. The Australian listed property trust is said to have interest from about 10 firms in a second round stage of a possible sale.

Aberdeen, Legal & General Property and Europa Capital have expressed interest, as have several private equity firms. Henderson, Schroders and Cordea Savills have ruled themselves out. The European management, led by Peter Hurley and Martin McCarthy, and supported by Valad Europe’s lender, Lloyds Banking Group, made a £52m buyout offer last December.

The offer was £4.5m below the carrying value and would have returned £26m of cash to Valad after contributions paid to the Duke joint venture with Lloyds, which was set up when Valad Europe was refinanced. The offer was withdrawn last month after it proved unpopular with shareholders. Simon Marais, managing director of Orbis, which has an 18% stake in Valad, called it “a highly opportunistic grab” of the business by management.

On 18 April, Valad announced that Peter Hurley had left with an A$1.9m pay-off. Valad also revealed this week that its European mandate to manage Kefren Properties’ portfolio in Sweden will be terminated. This is because senior banks, led by Barclays, have given up on restruc-turing the debt after two years of talks and filed for Kefren’s bankruptcy. Kefren represents 11%  of Valad Europe’s assets under management.

Valad will still manage nearly £3.8bn of assets and have a European network including strong Nordics and central European teams. This business could be attractive to managers looking to expand outside their domestic base. However, Valad has said it may yet keep the business in the hope of achieving a better price later. The commitment to pay the proceeds of any sale of the business to Duke runs until June 2012.

Valad is one of several European fund managers that are poised to be sold. US private equity real estate firm JER Partners is believed to be in talks  to sell its European arm. The business manages JER Europe III, which invested €1.8bn in 2006 and 2007 and was one of the worst performing opportunistic funds through the downturn.

Last year, some of the pan-European fund’s 42 limited partners approached other managers to seek help working out its investments.  A JER spokesman said the firm did not comment on market rumour. In the UK, Liverpool Victoria is selling its investment management arm, which manages £650m of property. The mutual insurer is reported to have appointed Fenchurch Advisory to find a buyer for LV=Asset Management, which has about £8bn of assets under management.

The firm’s property business, run by Howard Meaney, has three internal clients, the biggest, with a £325m portfolio. They are: The Liverpool Victoria Friendly Society, the life fund and the staff pension fund. It also manages a small portfolio for Heart of Oak Friendly Society and an open-ended investment company called LV=UK Property Fund.