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EQT closes Fund III on €4bn, posts solid returns

The Swedish firm wrapped up its latest fundraising effort €1.1bn above target on the back of healthy performance by its first vehicles.

EQT has reached a €4 billion final close on its third infrastructure fund, reaching its hard-cap after less than six months on the road.

The feat brings the Stockholm-based firm €1.1 billion past its €2.9 billion original target and concludes an offering that was about four times oversubscribed, according to sources with knowledge of the firm.

Infrastructure Investor had reported in January that EQT Infrastructure III’s final close on its €4 billion upper limit was imminent.

The fund has a duration of 12 years, with three extension options of one year, and a six-year investment period. It will follow a strategy similar to that of its predecessors, closed on €1.2 billion and €1.9 billion in 2008 and 2013 respectively. Fund II is nearing full deployment, with some money left for add-on acquisitions and follow-on investments, sources said.

The vehicles are posting healthy returns, with Fund I generating a 2.4x multiple on invested capital and a 26 percent IRR, while Fund II is producing a 1.7x multiple and a 35 percent IRR, a source close to the firm told Infrastructure Investor. EQT’s infrastructure franchise has so far deployed a total of €2.5 billion across 19 investments, eight of which have now been exited.

Known investors in the vehicle include AP4, Ardian, BlackRock, the Dai-ichi Life Insurance Company, Danica Pension, Fubon Life Insurance Company, Funds SA, Golding Capital Partners, Ilmarinen, KEVA, LGIAsuper, Local Government Super, the Maine Public Employees Retirement System, Nan Shan Life Insurance Company, the New York City Retirement Systems, the Oregon Investment Council, Pantheon, Sampension, Skandia, Sumitomo Mitsui Trust Bank, the Teacher Retirement System of Texas, Varma, VER and the Virginia Retirement System.

The vehicle will invest in North America and Europe, targeting equity ticket sizes of between €200 million and €500 million. A filing by the New Jersey Division of Investment also shows that the vehicle has a 1.6 percent management fee – discounted to 1.5 percent for first close participants – as well as a 20 percent carry and a 6 percent hurdle rate.

LATEST INVESTMENT

Earlier this week, EQT Infrastructure entered the US telecoms market with its acquisition of fibre-optic internet provider Lumos Networks Corporation, in an all-cash deal valued at $950 million sponsored by its third fund.

The firm agreed to purchase all of Lumos’ common stock for $18 per share, an 18.2 percent premium to the company’s $15.23 per-share price at close of Friday. Headquartered in Virginia, Lumos operates residential and commercial internet networks in the US Mid-Atlantic region through fibre optic cables.

Timothy Blitz, chief executive of Lumos Networks, said the company has achieved an annual shareholder return of nearly 19 percent since 2012. Lumos Networks went public in 2011.

A spokesperson for EQT called Lumos the “ideal platform” for the firm to enter the US telecoms market. EQT funded the acquisition with 50 percent debt, the rest being equity.

The deal brings the number of assets in EQT Infrastructure III’s portfolio to four, after the vehicle also purchased Danish B2B data communications business GlobalConnect, formed a joint venture with German energy services provider Getec Energie, and bought Dutch telecoms infrastructure and energy group Delta Comfort.