Townsend bankrolls UK takeover

US investment advisory giant, The Townsend Group, has emerged as a lender in what is set to become Europe’s next significant merger and acquisition deal.

The Townsend Group, the Cleveland-based investment advisory firm, is bankrolling the takeover of a British company that manages £749 million (€927 million; $1.2 billion) of assets, including a pan-European opportunistic fund and an Asian core-plus vehicle. Indeed, it has emerged from official takeover documents that Townsend is lending £40 million – practically all of the acquisition money – in two tranches to help London-based Palmer Capital swallow Invista Real Estate Investment Management.

The deal is set to become Europe’s next significant takeover of a property investment management platform given that the two significant shareholders in Invista, HBOS Insurance & Investment Group and The Wellcome Trust, have given irrevocable undertakings to sell their stakes to Palmer. The two investors control 79 percent of the ordinary shares between them.

Assuming the deal completes, Palmer will take on the management of the Invista Real Estate Opportunity Fund (IREOF) and the Invista Real Estate International Fund (IREIF). Both are closed-ended funds with a five-year duration that expires in February 2013 and May 2013, respectively.

IREOF was launched in October 2007 to capitalise on mispricing and distress in the UK and Continental Europe market, with Invista managing to raise £56 million at first closing. The fund is targeting a net total return on equity of at least 15 percent and has made six investments, all but one being in the UK. The other was made in Switzerland.

IREIF also is targeting 15 percent returns and is focused on the mature Asia-Pacific real estate markets of Hong Kong, Japan and Singapore. It was Invista’s initial step in developing an Asia-Pacific platform and was designed to diversify its investors’ exposure.

In an announcement of the deal, Invista and Palmer declared: “The boards of Palmer Capital and Invista are pleased to announce that they have reached agreement on the terms of a recommended offer, under which Palmer Capital will acquire the entire issued and to be issued share capital of Invista.”

In addition, Palmer noted that its offer for the ordinary share was 18 percent higher than that offered by a rival bidder, Internos Real Investors, but was the same in all other material respects. Accordingly, the Invista directors unanimously withdrew their recommendation of a previously announced offer by Internos and are now backing the Palmer offer.

Palmer Capital is a privately owned real estate investment manager and venture capital business with assets in Europe. It has raised around £350 million of equity from institutional investors for closed-ended real estate funds in the UK.

“This will be a major acquisition that will help us grow our team and brings us further assets under management in the UK, Europe and Asia,” said Alex Price, chief executive officer of Palmer Capital. “We are really excited by the prospect created by a combined business.'

Invista has been seeking a buyer since last year. As a result of HBOS severing contracts early, it was forced to consider various options. Management of some funds already has been transferred to third parties – Internos and Schroder Property included.