Private equity stirs with 2XU investment, speculation over Spotless deal

The private equity industry is buzzing this week as speculation continues over a rumoured move by Private Equity Partners to buy services group Spotless, with the ASX probing the company over a dramatic jump in its share price late yesterday.

The move comes just two days after Lazarus purchased a significant stake in sportswear firm 2XU with plans to make it Australia’s first global sportswear power brand, while the industry itself released figures yesterday that it argued showed private equity and venture capital continued to outperform the ASX.

Yesterday, after Spotless had released a statement to market saying it had not received any communication from PEP, it received a letter from the ASX questioning the cause of its recent significant share price rise of 25 cents to $2.45.

Spotless says it has not received a proposal and has not held any discussions with Private Equity Partners.

“Apart from information already publicly released and the press speculation referred to… the company is not aware of any other explanation that may explain the price change in the company’s securities,” the catering and cleaning company told the market.

A report today indicates Pacific Equity Partners is preparing to speak with major shareholders of Spotless as it prepares for a $700 million offer.

According to the Australian Financial Review, an offer could be made as early as today, leading up to the target’s annual general meeting on Friday.

The speculation follows Lazard Australia Private Equity’s investment in sports apparel group 2XU, run by Clyde Davenport who sold his Davenport underwear group for several million eight years ago.

In a statement, Davenport said the company would use the investment to help its ambitious growth.

“2XU is determined to be Australia’s first global sportswear power brand and with Lazard Private Equity’s expertise and involvement we believe we will accelerate this ambition.”

It is just one of several major private equity deals that have finalised this year, with MYOB, Quick Service Restaurants and Rebel Group all being acquired or taking investments from major private parties.

The Australian Private Equity and Venture Capital Association of Australia yesterday released figures from its CA Australia Index, that it argues shows the private equity industry has outperformed shares over the past few years.

For the quarter ending June 30, 2011, the CA Australia Index has annualised returns of 8.59% for one year returns, 2.42% for three year returns, and 4.23% for five year returns.

AVCAL chief executive Katherine Woodthorpe pointed out this compares favourably with the negative 4.26% result for the ASX300, adding it the result demonstrates private equity is delivering “substantial” net returns.

“The increased number of exists this year has also seen many of these investments delivering excellent returns to the pension funds and other institutional funds who are the primary investors in this asset class.”