Apax Partners and the founders of the internet company have requested a loan to finance the disbursement of a dividend of almost 70 million euros.
The investment of Apax Partners in Idealista can be considered one of the most profitable of the British funds in Spain and one of the brightest of private equity after the financial crisis. The shareholders of the real estate company have paid a dividend of almost 70 million euros in exchange for borrowing the company in a similar amount to finance the disbursement of the prize.
According to official documentation, Idealista has held an Extraordinary Shareholders Meeting where the purchase of 60.2 million treasury shares for subsequent amortization was approved. These securities, called P-class and without voting rights, represent 27.5% of the company’s current capital, which operates in Spain, Italy and Portugal and which last year gained close to 11.4 million euros.
This financial maneuver is known as ‘recap’ and was very common at the time of the boom before the crash of 2007 when venture capital funds bought and sold companies in record time. The operation consists of the owners paying themselves a dividend for the amount resulting from multiplying the number of securities to be amortized by the current value of the shares.
In this case, 1.09386 euros for each Idealist title, for which Apax Partners, owner of 81.5% of the capital, and the founders – the brothers Fernando and Jesús Encinar and César Oteyza – have distributed about 65.86 millions of euros. It’s an amount that adds to the 11.5 million euros that were paid as an ordinary dividend charged from results of 2016.
The operation responds, according to sources close to the shareholders, to the strategy of optimizing the balance of Idealist and Ivory Spain Midco, the Spanish company dependent on the Luxembourger Ivory Topco through which Apax acquired the real estate portal in the summer of 2015 for 220 million euros. It’s a typical private equity structure to pay fewer taxes to the national treasury and maximize investments.
The venture capital fund made that bet with an outlay entirely in cash without bank financing, per the norm in these type of transactions – they usually contribute up to 80% of the investment – due to the aversion of banks to lend money during a painful time to this sector mix of technology and brick. Now, Apax has chosen to borrow the company through a loan for an amount similar to the amortization of capital to make the Idealist balance more efficient and recover almost one-third of what was paid at once.
In fact, Apax financed itself with a loan of 135 million euros, with a maturity of 10 years, for which each year it pays 10.12 million through the contribution to the company’s equity. Loan interest amounts to 10.59 million annually, according to the accounts of Ivory Spain Midco.
The purchase of Idealista can, therefore, be described as a successful transaction. Both for the venture capital fund, which in record time has recovered part of the investment, as well as for the founders. In addition to the dividends, the brothers Enimar and Oteyza received another prize in the form of an extraordinary bonus for the agreement with Apax. As stated in the individual report of Idealista, “the remuneration for members of the board of directors and senior management accrued during the year 2015 in salaries and salaries amounted to 10.95 million euros”, compared to 494,000 euros paid in the year 2014 – a rise of more than 1,100%.
The above article was written and published in Spanish and has been translated into English. Click here to read the original article.