LONDON U.S. private equity firm HarbourVest Partners said it was taking advantage of a weaker pound to make a $1.35 billion (1.02 billion pounds) bid for smaller British rival SVG Capital (SVI.L) without the backing of its target's board.
The approach bucks a weaker environment for deal making in Britain, Europe's largest equity market, as many investors remain on the sidelines waiting for detail about the impact of the country's vote to leave the European Union.
As well as the chance to buy a target more cheaply following a post-vote weakening in the value of the pound, Boston-based HarbourVest said it was attracted by the company's short-term growth prospects.
HarbourVest said since 2008, the discounted net asset values of London-listed private equity funds were attractive, underpinning its 650 pence per share offer, a 14.7 percent premium to the stock's Friday close that values the firm at 1.02 billion pounds.
Liberum analysts said SVG's shares have traded at a persistent discount to NAV, like many funds in the private equity sector.
Commenting on the bid, David Atterbury, managing director at $42 billion HarbourVest, said: "We look forward to a constructive dialogue with [the board] in order to crystallise the certainty of value, today and in cash, to its shareholders."
SVG said on Monday in a separate statement that shareholders should take no action until the company publishes its interim results.
"The Board urges its shareholders to take no action at this time as the Company will publish its interim results on Tuesday 20th September. Shareholders will then have the relevant information on the Company and its performance," it said.
At 0941 GMT, shares in SVG, which listed in 1996 and has assets of more than 1 billion pounds ($1.33 billion), were trading up 14.6 percent at 649.50 pence a share.
HarbourVest, which has more than $31 billion committed to newly-formed funds, said SVG shareholders collectively holding 42.7 percent of the firm's share capital had already lent their support to the deal.
An investor with 20 percent of SVG shares had provided an irrevocable undertaking to HarbourVest while shareholders with a combined total of 22.7 percent had agreed to accept the offer via letters of intent.
Added to HarbourVest's own 8.5 percent stake in SVG, the commitments total 51.2 percent of SVG's existing shares, above the 50 percent needed to secure a deal. As a result, Liberum analysts said it was "highly likely" to succeed.
If the approach wins support from more shareholders holding at least 75 percent of SVG's equity, HarbourVest said it plans to delist from the stock exchange, a move that would "significantly reduce the liquidity" of any remaining shares.
The largest shareholder in SVG Capital is Coller Capital with a 26.6 percent stake, Thomson Reuters data showed. Coller was not immediately able to comment when contacted by Reuters.
Jefferies acted as financial adviser to HarbourVest, it said.
(Additional reporting by Noor Zainab Hussain; editing by Sunil Nair and Jason Neely)