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Virginia Plan Sticks to Private-Equity Course | Saudis Rewrite Sovereign Script | Manulife Hugs Forestland
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Good morning! The market seesaw grinds on as our Wall Street Journal colleagues report that the Dow Jones Industrial Average has climbed out of bear market territory. With pension systems grappling with imbalances largely caused by this year's slump in securities markets, maybe yesterday's 700-odd point move shows there's no need to make changes in asset mixes if they can just wait a while.
In Virginia, that hold-fast approach came to the forefront yesterday as our Laura Kreutzer reports that the director of private equity for the state's public pension system doesn't plan to put the brakes on new commitments just because its public-equity assets are 5 percentage points below target, levering up the PE proportion to 3 points above its goal. Pensions across the U.S. face similar imbalances, and some are also holding steady or, as in Texas, are increasing commitment levels to private assets.
In other news today, Rory Jones writes for the Journal that Saudi Arabia's sovereign-wealth fund is remaking the usual scope of such vehicles, taking big loans and making direct investments.
Finally, our Journal colleague Ryan Dezember reports that Manulife is raising a $500 million fund to increase its timber stock to get into the carbon-offset market. Instead of harvesting trees, the insurer plans to let them grow and absorb more carbon dioxide.
We have these stories and many more on deals and people moves, as well as a report on a rare appearance by FTX founder Sam Bankman-Fried, so please read on...
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Virginia's Capitol stands in Richmond. PHOTO: DREW ANGERER / GETTY IMAGES
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Like many other public pensions, the Virginia Retirement System has seen the value of its private-equity portfolio exceed its target this year as public securities have declined, Laura Kreutzer reports for WSJ Pro Private Equity. The system's private-equity director, however, has no plans to curb new commitments to the asset class to help restore balance to the $96.8 billion pension’s investment portfolio. The pension system has a goal of having about 16% of its assets in private equity, but the class represented around 19% of assets as of Sept. 30. Public equities accounted for 29% of assets, compared with their 34% target, reflecting this year’s market slump.
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Saudi Arabia's sovereign-wealth fund said it has received a $17 billion, seven-year loan from a collection of banks, providing a fresh injection of cash for a kingdom pouring unprecedented amounts of capital into diversifying its oil-dependent economy, Rory Jones reports for The Wall Street Journal. The fund’s borrowing, while not unique, is unusual for sovereign funds. The Saudis have reinvented the traditional meaning of a sovereign-wealth fund, industry consultants say. The fund has combined elements of a private-equity firm and venture-capital investor with a mandate to develop new industries at home to increase the government's non-oil revenues.
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Manulife Financial Corp., one of the biggest U.S. timberland owners, is branching out into forest-offset markets, raising a pool of cash to buy properties where sequestering the carbon in standing trees will be prioritized over logging for wood products, Ryan Dezember reports for The Wall Street Journal. The idea is to buy forests with good potential for conservation deals and manage them to maximize how much carbon is accumulated. Logging less and allowing more trees to absorb carbon as they grow is rewarded with offsets, which companies use to make up for their emissions of greenhouse gasses. Toronto-based Manulife already has about 6 million acres of timberland in the Americas and
Oceania and now aims to raise a $500 million fund to buy more.
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$700 Million
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The estimated aggregate losses for sponsors of the 48 special purpose acquisition companies that have already liquidated this year or the 40 that plan to before next year, according to data provider SPAC Research
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A sign greets visitors to Hitachi Ltd.'s headquarters in Japan. PHOTO: SHOKO TAKAYASU / BLOOMBERG NEWS
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KKR & Co. said it received commitments from holders of more than 51% of the shares in publicly traded Japanese logistics business Hitachi Transport System Ltd. through an ¥8,913 a share, or $64.26 a share, tender offer that concluded Tuesday, moving its more than $5 billion buyout closer to completion. The New York firm said it expects to obtain the remaining shares in the business through a squeeze out process and from corporate affiliate Hitachi Ltd. KKR announced the deal in April.
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Two unnamed private-equity firms sent an “unsolicited, nonbinding indication of interest” in acquiring and taking private Orthofix Medical Inc., sending the medical device maker’s shares higher Wednesday, Stephen Nakrosis reports for Dow Jones Newswires. The Lewisville, Texas-based company said the offer was for $23 a share in cash, implying an equity value of roughly $460 million. The offer was contingent on arranging debt financing, Orthofix said.
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A group including Macquarie Asset Management that had bid for Telecom Italia SpA's network infrastructure has allowed to lapse an agreement to merge the Italian company’s grid with that of smaller rival Open Fiber SpA, Ed Frankl and Mauro Orru report for Dow Jones Newswires. Government-controlled Open Fiber is part of the bidder group, which also includes state-controlled lender CDP Equity SpA. The merger agreement was meant to separate Telecom Italia's fixed-network infrastructure from its commercial activities to create a single telecom-network operator, accelerating the deployment of fiber-optic infrastructure throughout Italy. The Italian
government said it was setting up a working group to explore other options for the so-called single-network project, and the Telecom Italia bidder group said it stood ready to take part in the discussions. Telecom Italia shares fell 5.2% in Milan on Wednesday. KKR & Co. earlier had proposed a roughly $12 billion take-private of the company but later said it couldn’t conduct due diligence to pursue the deal.
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Brookfield Asset Management Inc.’s infrastructure group is investing in Swedish real estate company Samhällsbyggnadsbolaget i Norden AB, or SBB, agreeing to acquire a 49% stake in SBB’s Nordic education portfolio, Dominic Chopping reports for Dow Jones Newswires. Brookfield has agreed to pay as much as 10.4 billion Swedish kronor, equivalent to about $982.8 million, in cash for the stake. The holdings range from nursery schools to universities and will be transferred into a new subsidiary, EduCo, managed by SBB. Brookfield will pay SEK9.2 billion up front, with earnouts that could reach SEK1.2 billion. The assets are expected to generate SEK2.3 billion of revenue next year
and net operating income of SEK1.9 billion.
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Healthcare-focused Global Healthcare Opportunities, or GHO Capital Partners LLP, said in an emailed news release that it has invested in Sapio Sciences, a laboratory informatics technology platform that serves life sciences research and development for international biopharmaceutical companies, contract research organizations and clinical diagnostic labs, according to an emailed press release.
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Audax Group in Boston said its private-equity arm is backing beauty-care support company Salon Lofts with a growth investment. The Columbus, Ohio, company has more than 210 locations across 10 states, offering work space and support services to independent beauty-care professionals, according to a news release.
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Edison Partners in Princeton, N.J., said it led a $31 million growth investment in cybersecurity company Sphere Technology Solutions Inc., with participation from existing investor Forgepoint Capital. The Newark, N.J.-based software-as-a-service provider specializes in digital identity protection and security.
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NOVA Infrastructure has acquired Xchange Telecom LLC, a provider of broadband services in parts of New York City as well as upstate New York and New Jersey, according to a news release. NOVA, which invests in midmarket infrastructure businesses, wrapped up its debut fund in July with $565 million, WSJ Pro Private Equity reported at the time. The New York-based firm first backed Xchange last year.
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Pacific Equity Partners in Australia has modified a proposal to acquire publicly traded ReadyTech Holdings Ltd. for 4.50 Australian dollars a share, equivalent to about $3.01 a share, a regulatory filing shows. Pacific said shareholders could opt to receive scrip instead of cash for their shares, or a blend of cash and scrip, which represents a right to invest in a new acquisition entity. ReadyTech said it is inclined to work with Pacific on the updated proposal, which values the software maker at about A$370 million, to hone the details.
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Blackford Capital in Grand Rapids, Mich., said it has acquired Artificial Turf Supply to add to its collection of businesses focused on residential and commercial outdoor products. The Carlsbad, Calif., company supplies synthetic and artificial turf for a mix of uses including athletics fields.
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Junior capital investor Northstar Capital said it is backing the acquisition of Standard Locknut LLC by Tonka Bay Equity Partners with debt and equity co-investments. The Indianapolis company makes fasteners, bearing components and other parts used in a variety of industries. Northstar is investing from its Northstar Mezzanine Partners VII LP fund. Tonka Bay acquired the business from Dunes Point Capital-backed Industrial Group Holdings LLC.
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Agilitas Private Equity in London said it is investing in a carveout from Saab AB that will make Saab’s Netherlands-based Maritime Traffic Management business into a stand-alone company. The business produces software and systems used to monitor and manage shipping traffic, including port operations.
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Trive Capital Management in Dallas said it is backing tactical visualization software and surveillance systems supplier Forward Slope Inc. The San Diego-based company supplies its products, which include geospatial mapping and cybersecurity tools, to the U.S. Navy and other national security customers.
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Piva Capital and Arsenal Growth Equity led a $33 million growth investment in logistics company OneRail, according to a news release. The Orlando, Fla.-based company, whose legal name is On Demand Technologies Inc., provides technology-driven management of last-mile deliveries in more than 330 U.S. cities.
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AGIC Capital has acquired a majority interest in manufacturing processing systems maker ATEC Pharmatechnik GmbH from the company’s founder and family-backed Hannover Finanz Group. The sellers remain as minority backers of the company which provides processing and manufacturing systems to pharmaceutical companies.
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Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.
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Carlyle Group Inc. is selling manufacturer Paradigm Precision to Clayton, Dubilier & Rice and Greenbriar Equity Group, which plan to combine the company with Greenbriar-backed aerospace engine maker Whitcraft Group, according to a news release. The combined business will focus on making aircraft engine components for commercial and military use. An operating adviser to Clayton, former Boeing Co. executive Ray Conner will become chairman of the merged company. Greenbriar has backed South Windsor, Conn.-based Whitcraft for about five years while Carlyle has backed Manchester, Conn.-based Paradigm since at least 2013.
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Placement agent Eaton Partners, a unit of Stifel Financial Corp., said it has hired Charles Korchinski as a director to lead the Rowayton, Conn.-based firm’s GP stakes advisory operations, which advise general partners of private funds. Mr. Korchinski is a co-founder of Bonaccord Capital Partners and was most recently a principal with the firm, which invests in asset managers.
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Argosy Healthcare Partners, a specialist investment unit of Argosy Capital, said it has hired Ryan Noon as a principal focused on deal execution. He was most recently with Universal Health Services and previously worked for NewSpring Capital.
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Black Bay Energy Capital in New Orleans said it has promoted Matt Schovee to managing director on its investments team and hired Grant McClure as an associate. Mr. Schovee is a founding member of the firm, which was formed in 2015, according to a regulatory filing. Mr. McClure joins from Gravity Oilfield Services, where he was a corporate development analyst.
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Credit-focused Maranon Capital in Chicago said it has hired three analysts, Tariq Beach, Bill Degnan and David Lee, to work with its portfolio team.
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A still from video of Sam Bankman-Fried speaking during the New York Times DealBook Summit.
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Sam Bankman-Fried said that he didn’t intend to commit any fraud or use customer funds to back leveraged bets that went wrong at Alameda Research, a cryptocurrency hedge fund attached to his FTX cryptocurrency exchange that pushed the exchange to bankruptcy, Alexander Saeedy reports for WSJ Pro Bankruptcy. “I didn’t knowingly commingle funds,” Mr. Bankman-Fried said during the New York Times DealBook Summit, making his first public appearance since the bankruptcy. He said he was surprised at the size of Alameda’s bets that went wrong. He also said he believed most U.S. exchange customers should be able to recover their locked-up crypto funds but that FTX’s international
customers may not be able to.
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The Franklin Templeton asset management unit of San Mateo, Calif.-based Franklin Resources Inc. has set up a learning program designed to help financial professionals better understand the growing number of alternative investments and strategies, including private equity and credit, real estate, infrastructure and hedge funds, according to a news release. The program offers self-directed online modules as well as in-person classes.
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Family offices are increasingly drawn to investing in private debt as yields have risen and transparency in the asset class has improved, according to a survey of senior executives at offices managing assets with an aggregate value of more than $98.4 billion. The survey, released by credit-focused Aeon Investments in London, said about 80% of respondents expect family offices to put more capital into private debt by 2024, with 9% predicting dramatic increases.
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