Actis buys out UK government’s stake

The emerging markets private equity and infrastructure investor has purchased the UK government’s remaining 40% stake for £8m as part of a deal that will see the government take a share of Actis’s future carried interest.

Actis, the emerging markets private equity and infrastructure investor, has bought the remaining 40 percent stake in the company held by the UK government for £8.0 million (€9.8 million; $13.0 million). The deal will see the government claim a share of future profits when Actis’s investments are realised.

Actis was set up under the new Labour government in 2004 to attract private capital to countries historically dependent on aid. It has since invested £1.7 billion in over 70 companies in Africa, Asia and Latin America. The firm was formed as a spinout from CDC, the UK government’s direct finance institution – at which point a 60 percent stake was sold to the Actis management team for just £373,000.

Actis and the UK government issued statements notably differing in tone today. Actis senior partner Paul Fletcher said “successive governments have shown real vision backing a private sector model like Actis” and claimed the firm had returned £3.1 billion to CDC “and by extension the British tax payer”.

However, UK international development secretary Andrew Mitchell said:  “Today’s agreement represents a much better deal for the taxpayer. While Actis has generated significant profits, the previous shareholding structure meant the taxpayer and Government did not receive any direct financial return at all.”

“This sale now gives the British taxpayer an opportunity to share in the future profits of the funds managed by this highly successful business,” he added, and predicted that the government’s independent financial advisers estimated the deal could be worth more than $100 million over time.

In a statement on its website, the Department for International Development said the profit sharing element of the deal would comprise a 10 percent share of carried interest profits from Actis Emerging Markets Fund 3 and Actis Infrastructure Fund 2 – which have so far invested in a combined 34 businesses – and a 7.5 percent share of carried interest profits in Fund 4, which is currently being raised.

Actis currently has $4.6 billion in funds under management, including $2 billion invested on behalf of CDC.