CVC returns €4bn to investors as it sells investments

CVC, the European buyout house which owns Formula One, returned €4bn to investors in the first three months of the year in another sign of the extent to which private equity has taken advantage of ebullient markets to offload investments.

The sums being returned by groups such as CVC contrast with a slow start to the year for buyout investments overall, with only €29bn in deals announced in the first quarter, a six-year low.

CVC's return reflects several sales and stock market listings of stakes in companies including Sunrise, the Swiss telecoms operator, and Brit, a UK insurer, during the quarter.

Shares in Sunrise, in which CVC retains a large stake, have risen by a quarter since its initial public offering in February.

The company announced the listing in late January days before the spike in the Swiss franc caused by Switzerland's central bank abandoning its target exchange rate against the euro.

High stock market valuations which make it easier for buyout groups to exit companies through listings also make it pricier to take new ones private, threatening future returns.

CVC is, however, eyeing a different approach for its next big potential deal, Britain's Center Parcs, valued at up to £2.5bn.

The holiday parks operator is being sold by current private equity owner Blackstone.

The bidding process has some months to run and Blackstone has also been working on an IPO, people familiar with the matter said.

CVC has, however, laid plans to make Center Parcs the first investment under its new longer-term "strategic" fund if it succeeds in a joint bid being prepared with Singapore's GIC.

The move would make Center Parcs' forested estates a window on the possible future of the buyout industry as it attempts to catch up with the world's biggest investors.

Launched last year, CVC's Strategic Opportunities fund has been targeted at institutional investors looking to put large amounts of capital to work for long periods of time.

The fund would invest in stable, low-growth companies that could earn mid-teen returns - below the buyout norm - but it would also charge investors lower fees as a percentage of assets than the typical 1 to 2 per cent.

Center Parcs could be a fit for the model given high occupancy rates and a relatively affluent, repeat customer base, which boost cash flow.

Private equity investors have, meanwhile, continued to branch out on their own with "co-investment" or taking direct stakes in deals alongside buyout groups.

The year's largest leveraged buyout this year, Permira and CPPIB's $5.3bn takeover of Informatica, involved co-investment. So has the year's biggest transaction involving private equity: 3G Capital's merger of Heinz with Kraft working with Warren Buffett's Berkshire Hathaway.

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