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Capital Markets

New ways to bridge public-private gap

Public shareholders have grown increasingly antagonistic to private-equity sponsors buying up companies on the cheap and refloating them at a premium in bull markets. Taking companies partially private could win public investors round and increase the potential size of such transactions. Peter Koh reports.

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IN THE UK, where the hostility of fund managers to public-to-private (PTP) deals led by private-equity houses is most pronounced, several banks are working on structures to enable fund managers to participate profitably in such deals. One such structure, using convertible unsecured loan stock (Culs) listed on London junior equity market AIM, is arousing particular excitement.

The Culs structure was developed by Kinmont, a corporate finance advisory boutique, with Travers Smith Braithwaite, a 200-year-old City of London law firm. Kinmont was set up in March 2003 by four former senior UBS executives with expertise in corporate finance, property fund management, equity sales, and European banks.

According to Kinmont, between 30 and 40 buy-outs are now considering using the structure, with at least one deal dubbed "partial private" expected to be executed within the next few months. Another two or three might take place later in the year.

Data from Dealogic show that in 2003 almost half as much equity as the $48.4 billion raised in initial public offerings was taken off stock markets globally through PTP deals. In the UK, the $7.2 billion of equity sunk in PTP deals was greater than the $4.7

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