Conversus Capital, L.P. (NYSE Euronext in Amsterdam: CCAP) ("Conversus") today announced that it has signed a definitive agreement (the "Purchase Agreement") with HarbourVest Structured Solutions II, L.P. ("HarbourVest Structured Solutions"), a newly-formed Guernsey limited partnership managed by HarbourVest Partners LLC under which HarbourVest Structured Solutions will acquire the entities that hold Conversus´ portfolio of private equity fund interests and direct co-investments for $1.4 billion based on an account balance date of 30 April 2012 (implied value of $22.11 per unit as of 30 April). In addition, Conversus had net cash and directly held public equity securities as of 30 April totaling $66.4 million (implied value of $1.02 per unit), which are not being acquired by HarbourVest Structured Solutions; resulting in an implied total amount available to Conversus as of 30 April, before distributions and transaction costs, of approximately $23.13 per unit based on 30 April figures. Following each closing under the Purchase Agreement, Conversus intends to distribute the net proceeds received under the Purchase Agreement (as described in further detail below) to its unit holders. Promptly following the final closing under the Purchase Agreement, Conversus intends to appoint a liquidator to wind up its remaining operations and make a liquidating distribution in accordance with Guernsey law.
Conversus also announced that it has agreed to in-source the ongoing management of its remaining portfolio by purchasing its investment manager for $42.5 million. HarbourVest Structured Solutions will reimburse Conversus for $25.0 million of this amount.
In connection with the HarbourVest Structured Solutions transaction, Conversus is terminating its credit facility with Citigroup and has declared a cash distribution to unit holders of $0.30 per unit, or $19.5 million in aggregate.
As announced on 27 February, Conversus has been exploring strategic alternatives with the goal of enhancing unit holder value, and retained J.P. Morgan Securities LLC ("JPM") as its financial advisor to assist with the strategic review. Cleary Gottlieb Steen & Hamilton LLP represented Conversus in connection with the strategic review and the transactions announced today.
"Today´s announcements are the culmination of an extensive review of strategic options by the board and management, and we believe the results represent a great outcome for unit holders," commented Paul Guilbert, Chairman of Conversus GP, Limited.
Tim Smith, Chief Financial Officer of Conversus, commented further, "We look forward to working closely with HarbourVest as we transfer our assets and manage the ongoing portfolio during the interim period. Given the expectation of having multiple closings related to the transaction, the transfer and sale process could extend into 2013. However, we expect the majority of the transfers to take place during the last four months of 2012, and we are committed to paying out the net proceeds to unit holders in a timely manner."
Sale of Investment Portfolio and Election Alternatives for Unit Holders
Conversus has agreed to sell 100% of its private equity fund interests and direct co-investments to HarbourVest Structured Solutions for $1.4 billion in cash (except to the extent Conversus unit holders elect to receive ownership interests in HarbourVest Structured Solutions as described below). The purchase price does not reflect the net cash and directly held public equity securities owned by Conversus which totaled $66.4 million as of 30 April. The purchase price is subject to adjustments primarily consisting of net portfolio cash flows subsequent to 30 April. The transaction is subject to customary conditions, including receipt of various general partner consents with respect to some of Conversus´ investments.
Promptly following each closing under the Purchase Agreement, Conversus intends to distribute the related per unit consideration received from HarbourVest Structured Solutions to its unit holders. No assurances can be given as to exactly when closings under the Purchase Agreement or the related post-closing distributions will occur or the precise amount of the distributions.
Subject to certain legal restrictions and specified volume limitations, in lieu of receiving the consideration in cash, qualifying Conversus unit holders will be able to elect to maintain their exposure to the portfolio acquired by HarbourVest Structured Solutions by receiving ownership interests in HarbourVest Structured Solutions ("Roll-over Option") in lieu of cash. If Conversus unit holders elect to receive the Roll-over Option with respect to more than 49.9% of Conversus´ units, there will be a pro-rata allocation. Holders who make no election or do not qualify to elect the Roll-over Option will receive cash consideration. The ownership interests in HarbourVest Structured Solutions will not be listed on an exchange.
Prior to the first closing under the Purchase Agreement, Conversus will distribute a unit holder circular regarding the election alternatives, including detailed information regarding HarbourVest Structured Solutions. None of Conversus, its general partner´s Board of Directors, its investment manager or any other person referred to in this release makes any recommendation to unit holders as to the form of consideration to elect.
Conversus unit holders collectively owning approximately 63% of the outstanding units have confirmed to Conversus their approval of the transactions contemplated herein. Conversus unit holder approval is not a condition to closing.
The board of Conversus´ general partner received an opinion from JPM as to the fairness, from a financial point of view, of the aggregate cash consideration (assuming 100% of the consideration is paid in cash) to be paid to Conversus Investment Partnership, L.P. for the private equity fund and direct co-investment interests being sold in the transaction. JPM´s opinion does not address the Roll-over Option consideration available in the election or the consideration a unit holder should elect. JPM´s opinion is subject to various factors, assumptions and limitations set forth in its opinion.
The transaction is subject to customary closing conditions. Promptly following the final closing of the sale of its portfolio to HarbourVest Structured Solutions, Conversus intends to appoint a liquidator to wind up its remaining operations and make a liquidating distribution in accordance with Guernsey law. Upon completion of the liquidation, Conversus will cease to exist. This will effectively terminate Conversus´ listing on NYSE Euronext in Amsterdam ("Euronext"), to the extent the delisting cannot be achieved at an earlier date in consultation with Euronext and subject to such conditions as Euronext may propose.
Conversus has adopted the liquidation basis of accounting as of 30 June. In accordance with accounting principles generally accepted in the United States, Conversus´ estimated net asset value ("NAV") as of 30 June will reflect portfolio valuation adjustments related to the transaction and will include estimates for transaction related expenses and future operating expenses through the final liquidation of Conversus. The NAV will reflect Conversus´ best estimate of the net amount that will be available to unit holders.
Acquisition of Investment Manager
Conversus has reached an agreement to acquire Conversus Asset Management and Conversus Participation Company (together, "CAM") for cash consideration totaling $42.5 million less net liabilities assumed and in exchange for mutual releases including with respect to CAM´s rights under the existing Service Agreement. HarbourVest Structured Solutions has agreed to reimburse Conversus $25.0 million of this amount. Upon closing of the CAM acquisition, the current members of CAM´s investment committee will resign and be replaced with members of the board of directors of Conversus´ general partner, which will make investment decisions relating to the portfolio during the period between closing of the CAM acquisition and the planned appointment of a liquidator following the final closing under the Purchase Agreement. Kirkland & Ellis represented CAM in this transaction. Jenner & Block LLP represented Conversus in certain matters related to the acquisition of CAM.
The above proposals are subject to regulatory notification to the Guernsey Financial Services Commission.
Distribution to Unit Holders
Conversus has declared a cash distribution of $0.30 per unit, or $19.5 million in aggregate, which will be payable on or about 16 July 2012 to unit holders of record as of 9 July 2012. The distribution reduces the net cash balances noted above.
About Conversus Capital
Conversus is a publicly traded portfolio of third party private equity funds. Conversus provides immediate exposure to a diversified portfolio of private equity assets managed by best-in-class general partners. Conversus´ objective is to maximize long-term unit holder value by harvesting its existing portfolio and returning capital to unit holders.
About HarbourVest
HarbourVest Structured Solutions II, L.P.´s investment in Conversus is being made on behalf of HarbourVest-managed funds together with HarbourVest Global Private Equity Limited ("HVPE"), a Guernsey-incorporated closed-end investment company which has a dual listing on both the London Stock Exchange and Euronext Amsterdam. HVPE is advised by HarbourVest Advisers L.P., an affiliate of HarbourVest Partners, LLC.
HarbourVest Partners, LLC is an independent global alternative investment firm that invests in venture capital, buyout, mezzanine debt, and other private debt through primary partnerships, secondary purchases, and direct co-investments. Since 1986, HarbourVest has been a leading buyer of private equity assets, acquiring $9 billion of assets in deals across stages, types, vintages, and geographies and working with many types of sellers, including financial institutions, corporations, pension plans, government entities, endowments, and family offices. This flexibility enables HarbourVest to offer sellers of private equity comprehensive liquidity solutions. In addition to purchasing private equity and debt assets on a secondary basis, the HarbourVest team has committed more than $22 billion to newly-formed funds, and invested $4 billion directly in operating companies. The firm´s clients consist of 300 institutional investors, including pension funds, endowments, foundations, and financial institutions throughout the U.S., Canada, Europe, Australia, Latin America, and Japan.
Legal Disclaimer
This press release is not an offer to sell, or a solicitation of an offer to buy, securities in the United States or elsewhere. The securities of Conversus and HarbourVest Structured Solutions have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements thereunder.
Conversus is not a registered investment company under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"), and the resale of Conversus securities in the United States or to U.S. persons other than to qualified purchasers as defined in the Investment Company Act is prohibited.
This announcement does not constitute a prospectus or an offer within the meaning of article 3 of the Prospectus Directive (Directive 2003/71/EC as amended by Directive 2010/73/EU). This announcement has not been submitted to nor approved by any regulatory body.
This press release is not an invitation nor is it intended to be an inducement to engage in investment activity for the purposes of the restrictions on financial promotion set out in Section 21 of the Financial Services and Markets Act 2000 of the United Kingdom (the "FSMA"). To the extent that this press release does constitute an inducement to engage in any investment activity, it is directed only at: (i) persons who are outside the United Kingdom, (ii) persons who are investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) of the United Kingdom (the "Financial Promotion Order"); (iii) persons who fall within Articles 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") and Article 43(2) of the Financial Promotion Order; and (iv) any other persons to whom this press release can lawfully be communicated without breaching the prohibition on financial promotion in Section 21 of FSMA or any other relevant legislation (all such persons together being referred to as "relevant persons"). This press release must not be acted on or relied upon by persons other than relevant persons. Any invitation or inducement to engage in any investment activity included within this press release is available only to relevant persons and will be engaged in only with relevant persons. Anyone other than a relevant person must not rely on this press release.
Conversus is an authorised closed-ended investment scheme for Guernsey regulatory purposes. Conversus is registered with the Netherlands Authority for the Financial Markets as a collective investment scheme which may offer participation rights in the Netherlands pursuant to article 2:66 of the Financial Market Supervision Act (Wet op het financieel toezicht). Past performance is not necessarily indicative of future results.
The common units and related restricted depositary units of Conversus are subject to a number of ownership and transfer restrictions. Information concerning these ownership and transfer restrictions is included in the Investor Relations section of Conversus´ website at www.conversus.com.
Forward-Looking Statements
This press release contains certain forward-looking statements. In some cases, forward-looking statements can be identified by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," and "would," or the negative of those terms or other comparable terminology. Forward-looking statements speak only as of the date of this press release and include statements relating to expectations, beliefs, forecasts, projections (which may include statements regarding future economic performance, and the financial condition, results of operations, liquidity, cash flows, investments, business, net asset value and prospects of Conversus), future plans and strategies and anticipated results thereof, anticipated events or trends and similar matters that are not historical facts. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future, and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements including, but not limited to, the following: our ability to consummate the transactions described herein; our ability to implement successful investment strategies; risks associated with private equity investments generally, the performance and financial condition of the funds in our portfolio and their portfolio companies, and the actual realized value of investments; the size, volume and timing of capital calls, distributions and other transactions involving our investments; changes in our relationship with Conversus Asset Management, and its relationships; potential conflicts of interest; changes in our financial condition, liquidity (including availability and cost of capital), cash flows and ability to meet our funding needs and satisfy our contractual obligations; general economic and political conditions and conditions in the equity, debt, credit, currency, foreign exchange and private equity markets; the trading price, liquidity and volatility, of our common units; competitive conditions; regulatory and legislative developments, the timing and amount of any distributions made in respect of the common units, the timing and terms of any potential liquidation and the risks, uncertainties and other factors discussed elsewhere in these materials or in our public filings and documents on our website (www.conversus.com). Conversus does not undertake to update any of these forward-looking statements.
