PAI closes latest fund on €5.4bn

The fundraising effort was double the size of the European firm’s previous fund, above its €5bn target but below its hard cap.

PAI Partners, the firm headed by Dominique Mégret, has closed its latest European fund on €5.4 billion ($8.5 billion) at double the size of its previous fundraising in 2004.

Dominique Mégret:
cautious, but
expecting returns

Mégret said the firm had targeted €5 billion although its hard cap had been higher at an undisclosed amount. He said he did not want to continue fundraising for an extended period of time and it was better to raise an appropriate amount to invest.

The fund has yet to make an investment, which Mégret believes will place his firm at an advantage. “The best returns are obtained in the world during tough times, for obvious reasons and prices will go downwards. We are cautious because financing terms are more costly and vendors have not adjusted their expectations downwards,” Mégret said.  The fund has yet to make its first investment, he said.

Around 130 investors from 23 different countries invested in the fund. Nearly two thirds of investors came from Europe, 26 percent from North America and 11 percent from Asia and the Middle East.

PAI’s existing investors who significantly increased their average commitment size, accounted for more than 70 percent of the fund.

PAI invests in transactions ranging from €500 million to larger buyouts. Last year, it attempted to buy Altadis, the European tobacco company, alongside CVC Capital Partners, a European buyout firm, for approximately €12.8 billion. PAI abandoned the bid, which faced opposition from the French and Spanish governments, in June. Imperial Tobacco, a trade buyer, eventually bought the company in August.

Mégret said: “We decided not to [invest in Altadis] not because of the size, but because we considered we would have to pay too much, and the tobacco sector is not very much liked by LPs. But the main reason was the price and this transaction was meant to go to a trade buyer.”

We decided not to [invest in Altadis] not because of the size, but because we considered we would have to pay too much, and the tobacco sector is not very much liked by LPs.

 Dominique Mégret

The firm’s recent transactions include the buyouts last year of Kaufman & Broad, a French housebuilder, for €1.4 billion, and of Monier, a roofing business owned by Lafarge, a cement company, for €2.4 billion. Last year PAI also sold Elis, a French textile business to Eurazeo, a listed European investment firm, for €2.28 billion.

PAI span out of BNP Paribas, a French bank, in 2002. The firm divested more than €10 billion in 2007.

Amaury-Daniel de Seze, the first head of the firm, recently retired.