EQT to Acquire Baring Private Equity Asia
Posted on 03/16/2022
EQT AB (publ) (EQT) has reached an agreement to acquire Hong Kong-based Baring Private Equity Asia (BPEA), a private markets investment firm in Asia with €17.7 billion of assets under management. EQT went public in 2019 and dreamed of having a footprint in Asia. Asian private markets are expected to grow at almost twice the rate of global private markets and investors are set to materially increase their private markets allocations in the region. BPEA has 10 regional offices and 236 employees. It also recently held a first close on its eighth flagship fund, which could end up raising more than US$ 10 billion. BPEA was originally considering an initial public offering.
Key Transaction Details
EQT will acquire 100% of the BPEA management company, the BPEA general partner entities which control the BPEA funds, and the right to carried interest in selected existing funds (including 25% in BPEA Fund VI and 35% in BPEA Fund VII). EQT will invest in and be entitled to 35% of the carried interest in all future funds, starting with BPEA Fund VIII, in line with existing EQT policies. Total consideration of €6.8 billion on a cash and debt free basis (with a normalized level of working capital), of which approximately €5.3 billion to be paid through the issue of 191.2 million new EQT ordinary shares (corresponding to a dilution of approximately 16%), plus €1.5 billion in cash.
EQT has cash and facilities in place to fund the cash consideration. In addition, EQT may review long-term financing options.
The transaction is subject to customary closing conditions, including anti-trust, regulatory approvals and certain BPEA fund investor consent approvals, as well as EQT majority shareholder approval at the Annual General Meeting (AGM) in June 2022, granting the Board of Directors of EQT the authority to issue the consideration shares; major EQT shareholders representing in total more than 50% of EQT’s share capital have irrevocably committed to vote in favor of the share issue authorization. The Transaction is expected to close in Q4 2022.
Share consideration for Jean Eric Salata and other key members of BPEA’s management will be subject to customary lock-up provisions, consistent with those of current senior EQT partners (10% released in September 2023, the remaining shares are then released in equal annual instalments of 20% per year in September 2024, September 2025, September 2026, September 2027 and September 2028), while also including a share forfeiture mechanism. Share consideration for Affiliated Managers Group, Inc. (“AMG”), which owns 15% of BPEA, will have 75% of the EQT shares released at closing and 25% subject to a lock-up period of 180 days on the basis of a customary lock-up agreement for an institutional investor.
The combined Asian Private Capital business will be rebranded as BPEA EQT Asia and will continue to be led by BPEA CEO Jean Eric Salata and BPEA’s senior management team. EQT Private Capital will have two divisions post-Transaction – BPEA EQT Asia, comprising the combined BPEA Private Equity and EQT APAC Private Equity teams, and EQT Private Capital Europe & North America. Over time, BPEA EQT Asia is expected to provide the full suite of Private Capital strategies, from Ventures through Future, similar to what EQT Private Capital Europe & North America offers today. Mr. Salata will become Head of BPEA EQT Asia and will oversee EQT’s Private Capital business in Asia, reporting directly to Christian Sinding. Mr. Salata will also join EQT’s Executive Committee.
BPEA’s Real Estate business will be integrated into EQT Exeter, operating as one global platform. Since the acquisition of the Exeter Property Group in April 2021, EQT Exeter has been growing globally, including into Asia through the acquisition of Bear Logi in January 2022. The combination with BPEA Real Estate will significantly enhance EQT Exeter’s local presence across the region.
EQT Infrastructure will continue to operate on a global basis (including Asia) but is expected to benefit from BPEA’s strong local footprint to generate increased deal flow.
Morgan Stanley & Co. International plc is acting as financial adviser to EQT in relation to the Transaction, while Kirkland & Ellis International LLP and Vinge are acting as legal counsel. J.P. Morgan and Goldman Sachs are joint lead advisers to BPEA, and Simpson Thacher & Bartlett LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP and Mannheimer Swartling are acting as legal counsel to BPEA and Mr. Salata.
Keywords: EQT Partners AB (EQT Partners).