Tue May 1, 2012 8:04am EDT
* Actis to pay UK goverment 8 mln stg for 40 pct stake
* British taxpayers could get more than $100m from deal
* Government agrees to take share of future profits
By Simon Meads
LONDON, May 1 (Reuters) - The British government is selling its stake in emerging markets private equity group Actis in a move that could pull in tens of millions of pounds for British taxpayers, reversing what it viewed as a poor deal under the previous government.
Actis, one of the largest private equity investors in the world's poorest countries, said on Tuesday it is buying out the government's 40 percent stake in the company for 8 million pounds ($13 million) in cash.
The deal represents a successful payday for the government and International Development Secretary Andrew Mitchell in squeezing value out of an investment that had been valued at between zero and $3 million by the government's independent financial adviser Canaccord Genuity Hawkpoint.
More lucrative will be the share in profits that the government will receive over time from the sale of companies in which Actis has invested.
Canaccord Genuity Hawkpoint has estimated that the payments could be worth more than $100 million, which will flow back into public coffers.
"Today's agreement represents a much better deal for the taxpayer. While Actis has generated significant profits, the previous shareholding structure meant the taxpayer and Government did not receive any direct financial return at all," said Mitchell.
"This sale now gives the British taxpayer an opportunity to share in the future profits of the funds managed by this highly successful business."
Mitchell was highly critical of the deal in 2004 that saw the government invest in an independent Actis, claiming that it represented poor value for the taxpayer.
Despite the successful performance of funds managed by Actis, the ownership structure and agreement put in place under the previous government, meant that the Department for International Development received no payments or direct financial benefit from Actis.
He argued last year that the government should sell out if it could realise proper value for its position.
Actis management spun out the group from government-backed emerging markets investor CDC Group Plc, paying 373,000 pounds for a 60 percent stake in the business in 2004, with the government taking a 40 percent stake.
Since then, Actis has gone on to become one of the world's biggest emerging markets private equity specialists, with $4.6 billion of funds under management and investments in businesses as diverse as Rwanda's second largest commercial bank and fast food chain Xiabu Xiabu in China.
Despite selling its position in the management group, CDC has remained a cornerstone investor in Actis's private equity funds.
Actis said it has invested 1.7 billion pounds to date on behalf of CDC and returned 3.1 billion pounds to the group.
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