CVC Capital Partners is expanding in infrastructure, one of the most active areas of dealmaking, with a deal for DIF Capital Partners that will diversify its business ahead of a potential listing.
(Bloomberg) — CVC Capital Partners is expanding in infrastructure, one of the most active areas of dealmaking, with a deal for DIF Capital Partners that will diversify its business ahead of a potential listing.
The European private equity firm has agreed to buy a majority stake in DIF, according to a statement Tuesday, which confirmed an earlier Bloomberg News report. CVC is paying around €1 billion ($1.1 billion) in cash and stock for the business, a person with knowledge of the matter said.
Amsterdam-based DIF will bring €16 billion of assets under management and 225 employees spread across 11 offices in Europe, North America and Australia focused on mid-market transactions.
DIF has announced deals this year to invest in a Finnish fiber-optic network, a Canadian geothermal power company as well as student housing assets, an energy storage company and a district heating provider in the UK. Private equity firms have often found it easier to finance infrastructure investments offering predictable returns, and funds dedicated to that strategy have been raising ever-larger pools of capital.
“Expanding into infrastructure is a logical next step for us, given the long-term secular growth trends in infrastructure and its adjacency to our existing strategies,” CVC Chair Rolly van Rappard said in the statement. The deal will boost the assets under management at CVC, which is already one of Europe’s biggest private equity firms, to about €177 billion.
New Strategies
CVC has pledged to acquire the remaining stake in DIF over time, according to the statement. DIF will retail its current brand and keep independence over its investment decisions under the leadership of the firm’s current chief executive officer, Wim Blaasse, and its existing partners.
The firm’s Dutch works council has expressed support for the deal, which is expected to be completed in the fourth quarter of this year or first quarter of 2024, it said in Tuesday’s statement.
CVC’s move comes as major institutional investors increasingly dedicate money to larger private equity firms that can offer a “one-stop shop” through a range of strategies, rather than doling out smaller chunks of money to an array of different firms.
A number of other major investment firms, from New York giants like Blackstone Inc. and KKR & Co. to European rivals such as EQT AB, already have dedicated infrastructure businesses that now account for some of their biggest transactions.
Turbulent credit markets and rising interest rates have also made it trickier for buyout firms to pull off good deals. That’s led the volume of private equity takeovers to fall 47% this year to $138 billion, according to data compiled by Bloomberg, and put an increasing focus on faster-growing areas like private credit and infrastructure.
Yield Play
CVC said in July it had raised €26 billion for the world’s biggest-ever buyout fund, defying a challenging fundraising environment. It’s been building out new areas, agreeing to buy London-based Glendower Capital in 2021 to gain a foothold in the fast-growing market for secondaries.
The firm also runs other strategies from credit and direct lending to growth investments. CVC, which ranks as one of Europe’s biggest private equity firms with around €140 billion under management, has been seeking to diversify its business in preparation for an initial public offering in Amsterdam.
DIF runs traditional infrastructure funds aiming for low-risk investments that can generate strong yields, with targets ranging from government concessions and utilities to renewable energy projects. It also has a core-plus strategy focused on small and mid-sized companies in the telecommunications, transport and energy transition sectors with asset-heavy business models.
The firm started raising capital last year for a new €4 billion infrastructure fund as well as a €1.5 billion core-plus fund, according to its website.
Blaasse, its CEO, is a former PwC partner responsible for public-private partnerships. DIF was founded in 2005 by Dutch entrepreneurs Maarten Koopman and Menno Witteveen, who worked at predecessors of ABN Amro Bank NV and built up industrial company DTG before selling it in 2002.
JPMorgan Chase & Co. was among advisers to CVC on the transaction, while DIF worked with firms including Morgan Stanley.
(Updates with purchase price in second paragraph)
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