Deutsche Beteiligungs puts brave face on market problems

Listed German mid-market buyout firm Deutsche Beteiligungs' head Wilken von Hodenberg (pictured) has emphasised the firm's relatively lowly leveraged business to defend its positive outlook in contrast to its two month share price plunge.

Germany’s oldest private equity firm Deutsche Beteiligungs has put forward a positive statement about its prospects despite the damage to its share price caused by the problems in the debt markets.

The buyout firm’s share price has dropped by nearly 20 percent from its €32 ($44) high at the beginning of July to €26.30 today at 11.35 am CET.

The buyout firm said in a statement: “(The share price) has suffered from the present state of uncertainty prevailing among market participants. The turmoil in the US credit market has led to very negative opinions on future business opportunities for private equity companies.”

However, Deutsche Beteiligungs’ board’s spokesman Wilken von Hodenberg said in a statement: “We possess a good number of stable bank relationships that have proved resilient even in difficult market environments, in light of our long, successful investment history.”

The buyout firm’s investment plan, which includes companies in cyclical industries and involves lower borrowings than many other buyout firms, meant the business would only be marginally impaired by market problems, he said.

The buyout firm had profits of €44.2 million for the three months to 30 July 2007, according to its third quarter interim report.

For the nine-month period it had profits of €138.1 million. This is more than double last year's equivalent period where it made €63.6 million of profit. The company’s net asset value rose by €2.95 to €25.19 per share over the three quarters. Including dividends this is equivalent to a gain of €9.12, or 56.8 percent on the opening net asset value per share at the start of the financial year.

The buyout made realisations from a part-sale of woodworking company Homag Group raising €53 million through an IPO and the sale of Dörries Scharmann Technologie to A-TEC Industries in August for an undisclosed sum.

Deutsche Beteiligungs held 34 percent of its assets in cash on 31st July, while its other assets were its portfolio of German mid-market companies.

The company’s shareholders may also be partially compensated for their losses on the back of the share price decline. The buyout firm began an ongoing share buyback programme on 16 August 2007, repurchasing 103,627 shares to date for an average price of €23.88 per share. The company will buy back up to 727,505 shares, which will be cancelled without reducing the share capital.

The buyout firm’s board declined to comment on the profit outlook for the remaining months of the year citing the extreme volatility of the capital markets and its dependence on its part-listed investment in the Homag Group, where it retains a 16.8 percent stake. However, the board said it did not think its portfolio companies would be negatively affected by the market correction.