HgCapital Trust is selling its whole stake in fund administrator Gen II to KKR for about £71m, 34% above its carrying value, though the deal is not expected to complete until 2027.
HgCapital Trust (LON: HGT) has agreed to sell its entire stake in Gen II as KKR buys the private-markets fund administrator at a $5.1bn enterprise value. The trust, which gives investors exposure to unquoted software and services companies managed by Hg, said its share is worth about £71m.
HGT shares were quoted at 381.17p at 8am London time today, up 2.19% from yesterday’s close of 373p. The quote is early and based on only 14,138 shares, so it is thin, but the rise is consistent with the news rather than proof of it.
KKR is buying through its Core Private Equity vehicle from Hg, General Atlantic and other minority investors. Gen II Fund Services, founded in 2009 and led by chief executive Steven Millner, serves more than 275 managers representing over $2 trillion in assets. Hg and General Atlantic co-led the 2020 investment, and revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) have quadrupled since, through organic growth and four acquisitions.
Chris Harrington, Partner at KKR, described the appeal:
Gen II is exactly the type of financial services business we look for – a sophisticated sector leader with exceptional client relationships and a differentiated service model.
Chris Harrington, KKR
HGT’s £71m compares with a carrying value, the figure recorded in its books, of £53m in its pro-forma net asset value (NAV) at the 31st of August. That is £18m, or 34%, higher, worth 4.0p a share. Pro-forma NAV is £2.4bn, or 529.5p a share.
The gain is a valuation marker, not cash received. The sale is subject to customary closing conditions and regulatory approvals and is expected to close in 2027. HGT has liquid resources of about £347m, 14% of pro-forma NAV, against about £2.0bn of outstanding commitments.
At 381.17p the shares remain well below the 529.5p NAV, so the discount persists. The deal does show a buyer paying for scaled fund-services businesses, and Justin von Simson, Partner, and Stefanie Raiola, Director, at Hg said Gen II had become one of the most respected platforms in private capital administration.
Any read-across to private equity fund-services valuations is inference, however: the announcement gives no multiple or Gen II financials, and the terms were not disclosed.
