REG - Petershill Prtnrs - Sale of majority stake in General Catalyst

Petershill PartnersAnnouncement

16/01/2025 07:00

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RNS Number : 5079T  Petershill Partners PLC  16 January 2025

This announcement contains inside information

Petershill Partners plc ("Petershill Partners"), today announces the sale of
the majority of its stake in General Catalyst at a significant premium and its
intention to pay a special dividend of 14.0 cents (USD) per share

Highlights

·     Petershill Partners has completed a sale of the majority of its
stake in General Catalyst. The sale arises from a capital restructuring being
undertaken by General Catalyst and external investors. The total nominal
consideration of US$726 million represents a 62% premium to the US$447 million
carrying value of the interests being sold as at 30 June 2024.

 

·     Since the initial investment was made into General Catalyst in
2018, the business model of General Catalyst has evolved significantly from a
pureplay venture capital firm into a global investment and transformation
company, which is expected to result in a shift from management fee-centric
earnings towards longer term performance-related value creation. Consequently,
the change is less aligned with the Petershill Partners' alternative asset
management investment strategy.

 

·   The assets disposed of by Petershill Partners comprise its interest in
General Catalyst's management fee earnings ("FRE") and future performance
related earnings ("PRE"). The Company will retain rights to PRE and balance
sheet assets relating to existing funds with a carrying value of US$137
million as at 30 June 2024. These are expected to be realised and run-off over
time.

 

·      The US$726 million consideration is being paid in the form of
interest-bearing loan notes. US$207 million of the outstanding principal
amount of the loan notes is expected to be repaid in cash by 31 March 2025
with the remaining US$519 million outstanding principal amount being repaid
over time. The initial interest rate on the loan notes will be 10% per annum
and will be payable on the outstanding principal amount of the loan notes.

 

·    The total nominal consideration equates to 21% of Petershill
Partners' market capitalisation, based on the closing share price of 259 pence
per share on 15 January 2025. The impact of the sale is a reduction to 2025
distributable earnings of approximately 9%, based on current consensus
distributable earnings of US$382 million, predominately reflecting reduced
Partner Fee-related earnings. The Partner Fee-related earnings interests in
General Catalyst are structured as a revenue share and the sale will
accordingly reduce Petershill Partners' FRE margin by about 4 percentage
points. The impact on 2025E consensus adjusted earnings before interest cost
and tax is expected to be offset by the interest income from the loan notes,
whilst the notes are held 1  (#_ftn1) .

 

·      The transaction further demonstrates Petershill Partners' value
creation model, where the blended discount rate implied in the holding value
of General Catalyst at 30 June 2024 was approximately 17%, compared to the
implied blended discount rate on exit of approximately 11%, and the typical
reinvestment in new deals at an implied blended discount rate of 15-20%. The
transaction also addresses the divergence between General Catalyst's future
business plan and Petershill Partners' alternative asset management investment
strategy. Petershill Partners retains a high quality and diversified
portfolio, with the top five partner firms by ownership weighted AUM (Q2 2024)
unchanged post the disposal. Since the start of 2024 and including this
disposal, the aggregate nominal consideration due from sales of stakes in
Partner-firms has amounted to US$1,301 million relative to a carrying value of
assets disposed of US$930 million, a premium of approximately 40%.

 

·   The Board intends to retain the majority of the net proceeds from the
sale for redeployment into new investments. The Board also intends to declare
a special dividend of 14.0 cents (USD) per share, equivalent to US$151
million, reflecting the return to shareholders of the majority of the net gain
on the disposal after providing for taxes and fees.  A further announcement
on the timing of this special dividend will be made after the first loan notes
have been repaid, which is expected to be at the end of the first quarter of
2025.

 

Ali Raissi-Dehkordy and Robert Hamilton Kelly, Co-Heads of the Petershill
Business within Goldman Sachs Asset & Wealth Management commented:

 

"This transaction further demonstrates our ability to realise assets at
attractive valuations relative to their holding values and allows us to exit
the investment while facilitating General Catalyst's vision of building a
global investment and transformation company over time. General Catalyst is an
exceptional firm, and Petershill Partners and General Catalyst have benefitted
from seven years of collaboration and growth. We wish them every success as
they continue to execute on their business plan, support innovative founders
and drive future global transformation. We see good opportunities to redeploy
the retained proceeds from the sale into new investments that will drive
attractive future returns for shareholders."

 

 

 

Detailed Notes:

 

·      The US$726 million consideration is being paid in the form of
interest-bearing loan notes. US$207 million of the outstanding principal
amount of the loan notes is expected to be repaid in cash by 31 March 2025.
The remaining US$519 million outstanding principal amount of the loan notes
will mature between the 6(th) and 8(th) years after issue and will have an
initial interest rate of 10.0%, increasing annually by 1.0% for four years,
with the first interest rate step up at the beginning of 2026.There is no
non-call period and it is possible that an additional portion of the remaining
US$519 million outstanding principal amount of the loan notes will be repaid
in 2025. There is also a partial mandatory quarterly amortization of the loan
notes from 2026.

 

·    The loan notes are an obligation of the main holding company which
owns the substantial majority of the businesses which form part of the General
Catalyst group and benefit from a range of covenant and other credit
protections.

 

·     The indicative IFRS gross gain is US$279 million, before deducting
the estimated increase in divestment fee accrual, estimated tax and related
charges.

 

·     The total divestment profit on the disposal relative to the
contribution value at the IPO of Petershill Partners is US$472 million. As at
30 June 2024, accrued divestment fees of US$38 million were held against the
valuation of Petershill Partners' interests in General Catalyst, and the
divestment fee accrual in respect of the General Catalyst interests is
estimated to increase by US$56 million as a result of the disposal. Divestment
fees are payable on realised cash and will only be payable when the loan notes
are repaid.  There is an estimated increase in the accrual for tax and
related charges of US$28 million on the sale which will be added to the
existing accrual held of US$47 million.

 

 

 

ABOUT PETERSHILL PARTNERS

Petershill Partners and its subsidiaries is a diversified, publicly listed,
global alternatives investment group focused on private equity and other
private capital strategies. Through its economic interests in a portfolio of
alternative asset management firms ("Partner-firms"), Petershill Partners
provides investors with exposure to the growth and profitability of the
alternative asset management industry. Petershill Partners is operated by
Goldman Sachs Asset Management and is governed by a diverse and fully
independent Board of Directors (the "Board").

 

Through our Partner-firms, we have exposure to US$328 billion of total assets
under management ("AuM") as at 30 September 2024, (US$308 billion on a
pro-forma basis excluding General Catalyst), comprising a diverse set of more
than 232 long-term private equity and other private capital funds where
capital is typically locked in over a multi-year horizon. These underlying
funds generate recurring management fees and the opportunity for meaningful
profit participation over the typical 8+ year lifecycles of such funds.
Petershill Partners believes its approach is aligned with the founders and
managers of its Partner-firms and, as a result, allows Petershill Partners to
participate in these income streams in a way that provides high-margin,
diversified and stable cash flows for its shareholders.

 

For more information, visit https://www.petershillpartners.com
(https://www.petershillpartners.com) . Information on the website is not
incorporated by reference into this press release and is provided merely for
convenience.

 

ISIN: GB00BL9ZF303

 

 

ABOUT GENERAL CATALYST

General Catalyst was founded in 2000 and is headquartered in Cambridge, MA,
with additional offices in San Francisco, New York, London, Berlin and
Bengaluru. General Catalyst is a venture capital investment firm that focuses
on providing capital to meet the evolving needs of founders and their
businesses, including seed-stage, early-stage and growth equity investments in
enterprise technology and consumer businesses.

 

For more information, visit  https://www.generalcatalyst.com/
(https://www.generalcatalyst.com/)

 

 

 

 

 

Contact Information

 

Please direct any questions to Petershill Partners Investor Relations, via
e-mail, at PHP-Investor-Enquiries@gs.com
(mailto:PHP-Investor-Enquiries@gs.com)

Analyst / Investor
enquiries:

 Gurjit Kambo    +44 (0) 207 051 2564

Media enquiries:

 Brunswick Group    phll@brunswickgroup.com (mailto:phll@brunswickgroup.com)
 Simone Selzer                          +44 (0)207 404 5959

 

 

 

 

 

These written materials are not an offer of securities for sale in the United
States. Securities may not be offered or sold in the United States absent
registration under the US Securities Act of 1933, as amended, or an exemption
therefrom. The issuer has not and does not intend to register any securities
under the US Securities Act of 1933, as amended, and does not intend to offer
any securities to the public in the United States. Any securities of
Petershill Partners plc referred to herein have not been and will not be
registered under the US Investment Company Act of 1940, as amended, and may
not be offered or sold in the United States or to "U.S. persons" (as defined
in Regulation S under the US Securities Act of 1933, as amended) other than to
"qualified purchasers" as defined in the US Investment Company Act of 1940, as
amended. No money, securities or other consideration from any person inside
the United States is being solicited and, if sent in response to the
information contained in these written materials, will not be accepted.

This announcement contains inside information for the purposes of Article 7 of
assimilated Regulation (EU) No. 596/2014 as it forms part of the law of the
United Kingdom by virtue of the European Union (Withdrawal) Act 2018, as
amended.  Upon publication of this announcement, this inside information will
be considered to be in the public domain.

The person responsible for making this announcement on behalf of Petershill
Partners is Naguib Kheraj, Chairman.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by the
use of forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "project," "target," "estimate," "intend," "continue," or
"believe" or the negatives thereof or other variations thereon or comparable
terminology. You should read statements that contain these words carefully
because they discuss our plans, strategies, prospects and expectations
concerning the business, operating results, financial condition and other
similar matters. These statements represent the Company's belief regarding
future events that, by their nature, are uncertain and outside of the
Company's control. There are likely to be events in the future, however, that
we are not able to predict accurately or control. Any forward-looking
statement made by us in this press release is based upon information known to
the Company on the date of this press release and speaks only as of such date.
Accordingly, no assurance can be given that any particular expectation will be
met and readers are cautioned not to place undue reliance on forward looking
statements. Additionally, forward looking statements regarding past trends or
activities should not be taken as a representation that such trends or
activities will continue in the future. Other than in accordance with its
legal or regulatory obligations (including under the UK Listing Rules and the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority), the Company undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.

 

 1  (#_ftnref1) Consensus estimate for 2025 distributable earnings of $382
million and 2025 adjusted earnings before interest and tax of $333 million.

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