Australia's PEP surpasses $1.4b in Fund VI first close

The first close came at the end of May, according to sources familiar with the situation. The firm is said to have outlined fundraising plans to LPs at its annual general meeting towards the end of last year and then opened the data room at the start of this year. It hopes to complete the process in the third quarter.

Assuming PEP hits the hard cap, it would have a similar amount of capital at its disposal to BGH Capital, which was established in 2017 by Ben Gray, formerly Asia co-head of TPG Capital. BGH closed its debut fund in May of last year with approximately A$2.6 billion in commitments. PEP and BGH are the only Australia-based private equity managers to have raised funds of more than A$2 billion.

PEP closed Fund V at A$2.1 billion in September 2015. This was less than the A$4 billion raised for the previous fund in 2007, but that vehicle included A$1.3 billion in non-discretionary co-investment capital allocated to deals on a pro rata basis. For Fund V onwards, PEP switched to a discretionary model, working with a relatively small group of large institutional investors.

The fundraising process for the new vehicle is likely to be smoother than that of its predecessor. PEP had deployed one-third of Fund IV when investment and exit activity in Australia seized up due to a sharp retreat in consumer sentiment and a strong negative swing in public equities in response to the global financial crisis. Private equity firms effectively missed an entire exit cycle.

PEP headed into 2013 with Fund V in the market and Fund IV unharvested. As a result, the fundraising process was drawn out, with momentum building only once Fund IV began to deliver. A total of A$1.2 billion was returned to LPs during the 12 months preceding the final close, with A$900 million more coming shortly thereafter.

PEP launched Fund VI, having already made several realizations from Fund V, through exits and dividend recaps. These include bakery business Allied Pinnacle, which was sold to Japanese strategic player Nisshin Foods. The deal was reportedly worth A$950 million, with Nisshin announcing in February that it would pay A$574 million, excluding net debt. PEP acquired Pinnacle from Kerry Group in 2015 and then merged it with Allied Mills. There were at least five bolt-on acquisitions in total.

Another exit came in October 2018 with the sale of Manuka Health, a New-Zealand based producer of premium honey used in dietary supplements, gourmet foods, and personal care products, after a three-year holding period. The buyer was Hong Leong Group, a Malaysian conglomerate.

PEP is also in the process of raising its first secure assets fund, which invests in companies in Australia and New Zealand that generate annuity income but also offer opportunities for traditional private equity-style operational improvement. It reached a first close of A$600 million last December. The target is A$750 million with the hard cap set at A$1 billion.

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• Topics
• Australasia
• Fundraising
• GPs
• Buyout
• Australia
• Pacific Equity Partners