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A TRULY EUROPEAN COMPANY

Skype is proof that venture capital investment in Europe can deliver globally competitive performance.

The creators are Swedish and Danish citizens, respectively; the engineers are based in Tallinn, Estonia; the business centre is in Luxembourg, and an additional office exists in London – Skype, the ground-breaking voice-over-internet protocol telephony provider created by technology entrepreneurs Niklas Zennström and Janus Friis, is a truly European enterprise.

Skype caused a sensation in September when it agreed to be bought by eBay, the global online auctioneering group, for up to $4.1 billion.

Among the beneficiaries of the deal is Index Ventures, the Geneva-headquartered venture capitalist that helped arrange an $18.8 million funding round for Skype in March 2003, along with US investors Bessemer Venture Partners, Mangrove Capital Partners and Draper Fisher Jurvetson.

To Danny Rimer, voice-over-IP specialist and a partner at Index, the significance of Skype's European roots is obvious: “Skype is proof that there are European technology companies that have the potential to leverage existing technology and make it more relevant to the consumer on a global scale,” he says.

Rimer won't quantify the return that Index stands to reap from its investment in Skype, but confirmed that it was the firm's greatest investment success to date.

Skype first caught Rimer's eye in early 2003 when he and his colleagues met Zennström and Friis, who had already proven themselves as the management team behind music-sharing platform Kazaa.

Skype's new owner eBay has agreed to retain the company's entire European set-up and invest further in its existing infrastructure, Rimer says. The company's status as a global innovator of European origin seems secure, in other words.

To Europe's venture capital community, Skype could make a lasting difference. Raising institutional capital for venture capital investment outside the US is no easy undertaking, as many investors prefer to put their venture allocations into Silicon Valley.

However, with Skype in the headlines across the world, this may soon change. If it does, champagne is likely to be popped open in VC headquarters all over Europe.

Or maybe it has already. Asked whether fellow European investors congratulated Index on their success with Skype, Rimer replies: “I can't think of a single European firm that didn't.”

CINVEN CONTINUES EXIT PUSH AHEAD OF FUND IV
European private equity firm Cinven has sold international gym operator Fitness First to funds advised by fellow LBO investor BC Partners for £835 million (€1.2 billion; $1.5 billion). Proceeds from the sale will take distributions from Cinven's current fund, Fund III, to €3bn, fuelling speculation that the firm will soon raise new money. Cinven acquired Fitness First in a £404 million public-to-private transaction in June 2003, funding the deal from its €4.4 billion third fund raised in 2002. UK-headquartered Fitness First serves over 1.1 million members through 424 clubs in 15 countries. The company had 346 clubs in operation when acquired by Cinven. According to Cinven, Fitness First expects to achieve EBITDA of around £95 million in the year to October 2005, an increase of 85 percent over comparable figures for 2002, the year before Cinven invested in the company.

WL ROSS ENTERS AUTO PARTS
New York-based WL Ross & Co. has moved into auto parts, completing its first investment in the sector through the $100 million (€83 million) purchase of a 25 percent stake in the equity of the Paris-based Oxford Automotive Aps, a manufacturer of stamping, assembled modules and mechanisms. WL Ross gained its stake from former creditors of Oxford through the exchange of notes for equity when the autoparts maker emerged from insolvency proceedings in April of this year. The firm has since partnered up with other investors and committed to serve as the standby underwriter to a rights offering of $100 million of new equity. For the Oxford investment, WL Ross will use its $1.1 billion WLR Recovery Fund III LP, which the New York-based turnaround shop finished raising in August.

3I EXITS IRISH NEWSPAPER GROUP
London-listed private equity group 3i has sold Local Press, owner of the Belfast News Letter and Derry Journal, to Johnston Press for £65 million (€97 million; $117 million). The exit provides 3i with capital proceeds of £40 million, representing a money multiple of 1.7 times and an IRR of 39 percent on its original investment. 3i backed the management buyout of Belfast-based Local Press from the Trinity Mirror Group in a £46.9 million deal in January 2004. The Local Press Group publishes 12 main titles, eight in Northern Ireland and three in the Republic of Ireland, with one published in both. Total weekly circulation is around 343,000, and includes the Belfast News Letter, the oldest continually published newsletter in the Englishspeaking world.

CARLYLE LOCKS UP CHILDREN'S CAR SEAT DEAL
The Carlyle Group has acquired UK-based children's car seat company Britax Childcare in a deal valued at £230 million (€339 million; $424 million). The vendor was Britax International, the Royal Bank of Scotland-owned diversified manufacturing group that is currently refocusing its operations on its core business. Britax Childcare is headquartered in the UK, and also operates in North America, Australia and Germany. Its products are sold under the Britax, Romer and Safe n Sound brands. Last year it generated revenues of approximately £120 million. Sources close to the deal cited the company's strong market position and its record of engineering innovation as reasons for Carlyle's interest in the company. A third factor was the growth of the market expected to come from regulations raising the age at which children are required to use safety car seats.

RABOBANK SELLS GILDE TO MANAGEMENT
Dutch retail bank Rabobank has sold its private equity subsidiary Gilde Investment Management to management for an undisclosed sum. Founded in 1982, Gilde Investment Management has been part of the Rabobank Group since 1996. Its range of active funds currently comprises Gilde Buyout Funds I, II and III, Gilde Europe Food & Agribusiness Fund BV (Gilde Biotech) and Gilde Participaties BV (Gilde Equity Investment). Rabobank held a 100 percent ownership of Gilde Investment Management prior to the transaction and has now fully exited, although it will continue to invest in all of Gilde's future funds as a limited partner, according to a spokesperson. The transaction would make it “much easier to attract outside investors but there are no plans to change its current structure,” said the spokesperson, adding that Gilde has made a first closing of its third buyout fund at €447 million.

STAR MAKES £260M PROFIT ON FIRST EXIT
Star Capital Partners, the Londonheadquartered private equity firm with a preference for capital-intensive infrastructure investments, has achieved its first exit to date by selling Inexus, an independent UK gas and electricity transportation business, to Australian investor Challenger Infrastructure Fund for £465 million (€681 million; $836 million). Inexus sources, develops and operates new gas and electricity connections mainly to residential properties in the UK. Star bought the business in August 2001 from Total, the French energy group, for £103 million. Having invested £18 million in the company originally, Star achieved proceeds of nearly £260 million on the disposal. The firm, which raised €581 million for its debut fund in 2001, specialises in what it describes as capital outsourcing. It aims to acquire underexploited capital sitting on a vendor's balance sheet, leverage the asset and then build an independent business around it.

ALTOR ACQUIRES SIMRAD YACHTING
The Nordic buyout firm has acquired boating electronics company Simrad Yachting from Norwegian technology group Kongsberg Gruppen.

Altor Equity Partners, the Stockholm-based buyout firm, has acquired Simrad Yachting, a company that makes electronic equipment for yachts and commercial vessels.

The debt-free deal is valued at NOK 586 million (€75 million; $90 million). The vendor, Norwegian high-tech group Kongsberg Gruppen ASA, retains its Simrad subsidiary's fisheries focused arm as it makes a better fit with the company's industrial focus.

“This was a classic case of a manufacturing company that has a strong technology focus and a good market position, but was a non-core operation of a large industrial corporation,” Hugo Maurstad, the Altor partner responsible for the deal, said.

“We see substantial opportunities for improving the top line, both through organic growth by stepping up the marketing effort, and through add on acquisitions in order to build up the company's product portfolio and geographical range.”