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Blue Sky Private Equity EC2010 Fund

Blue Sky Private Equity EC2010 Fund
Rebate 1.00%
Closing Date CLOSED
Minimum Investment $10,000
(for 100PercentInvesting clients)
Term 5 year term, with the flexibility to extend the
fund term by two successive one year periods
Target Fund Return 30% IRR
Research Zenith Approved

FUND OVERVIEW
The Blue Sky Private Equity EC2010 Fund is focussed on Australian-based small to medium sized enterprises with an enterprise value of $10 million to $30 million, providing expansion capital for growth organically or through acquisition. The Fund will typically hold substantial equity stakes of 30% to 50% with the aim to deliver investor exposure to rapidly growing private companies run by high quality entrepreneurs.

The Blue Sky Private Equity EC2010 Fund is Australia's only direct private equity fund with an Approved rating from a major research provider (Zenith).
   
Product Disclosure Statement
Supplementary Product Disclosure Statement - Dec 2010
BRW Investment Review
   

WHAT IS EXPANSION CAPITAL?
As an expansion capital investor, Blue Sky Private Equity (BSPE) searches for rapidly growing businesses that need additional capital to maintain growth. BSPE provide this capital, and in return take equity in the investee company along with board representation. BSPE investments typically involve very little debt, and they back existing businesses, not start-ups.

BENEFITS OF THE EC2010 FUND
 

An important source of uncorrelated returns and diversification in portfolios. and an increasingly important asset class for high net worth and retail investors.
Private equity provides superior risk adjusted returns to listed equities
Historically private equity has proven to be most profitable as an investment class following an economic downturn.
Expansion capital is an attractive segment of private equity as entrepreneurs seek growth capital that banks are currently unwilling to provide.
The longer-term horizon in private equity allows investors to mitigate the volatility involved in listed equity markets.
BSPE has a strong track record of delivering returns in the expansion capital segment, with more than $40 million of invested capital and returns of 30-35% p.a. across the downturn.
First round offering of $25m fully subscribed, second round offering now open.

SEED ASSETS

The Fund will be seeded with two investments, Viking Rentals and Lenard's, to provide investors with:
 

Immediate exposure to high quality private equity investments (in contrast to 'cash box' style investment vehicles);
A shorter fund term relative to typical private equity funds;
Exit year diversification (Viking and Lenard's may be exited early in the term of the fund);
The opportunity to provide follow-on expansion capital to these two businesses.

SUMMARY OF KEY TERMS

Summary of Key Terms

Fund Structure

‘Master-Feeder’ structure, open to both retail and wholesale/institutional investors
Target Fund Size $50 million across the entire fund
Target Fund Return 30% IRR
Minimum Investment $10,000 for 100PercentInvesting clients, $20,000 for retail fund; by negotiation for wholesale/institutional fund
Fund Term 5 year term, with the flexibility to extend the fund term by two successive one year periods
Unit Structure Partly paid units for wholesale fund, fully paid units for retail fund
Redemptions No redemptions during the life of the fund
Management Fee 1.85%pa of committed capital for wholesale/institutional fund; 2.0% pa for retail fund
Performance Fee 20% of all returns, only after investors receive 8% p.a. preferred return

ABOUT BLUE SKY PRIVATE EQUITY 

More than $40m of committed capital under management in the Private Equity sector, and a proven ability to generate returns during difficult economic conditions (30-35% IRR).
A highly qualified team with strong operational, strategic and transactional
experience combined with extensive academic qualifications from a range of global institutions.
Committed private equity team who have an interest in the success of the Fund through their own personal investment in the Fund, and through their ownership in the Manager.

VIKING RENTALS
In the four years since it was established, Viking Rentals has become one of Australia's largest toilet hire businesses with a fleet of almost 3,700 toilets.

OWNERSHIP OF THE SEGMENT THROUGH A SUPERIOR MODEL
Viking operates a high-service model where toilets are cleaned more frequently than is the case for competitors, allowing Viking to capture significant market share and customer loyalty. Viking's high market share minimises travel times between customer locations. reducing the average cost of servicing each toilet and allowing Viking to price competitively.

COMPATIBLE EVENT HIRE OPPORTUNITY
Viking recently acquired Elite Portables, an event hire business serving clients like music festivals and major sporting events. Viking Elite generates business on weekends and across summer, which balances the construction sector's 'working week' utilization and the construction slowdown over summer.

GROWTH OPPORTUNITIES
 

Geographical Expansion in Construction Hire
Viking Rentals' recent success in Melbourne indicates that its superior service-oriented rental model is appealing beyond South East Queensland. Viking Rentals will seek to grow its construction hire business organically and through acquisitions.
Expanding Events Hire Business
Viking Rentals' initial focus was on the residential construction sector, and this will continue to be Viking Rentals' core business. However, Viking Rentals' successful acquisition and integration of Elite Portables demonstrates the potential in the event hire sector and the benefits of participating in both segments of the market.
Related Services to the Construction Sector
While Viking Rentals began as purely a portaloo rental business it has developed a small and profitable business providing rental power poles to builders, and more recently temporary fencing sales. There is potential opportunity to expand these product lines in Viking Rentals existing, loyal customer base.

LENARD'S
Lenard's is an established, profitable food retailer specialising in the delivery of poultry products to consumers, The Lenard's franchise network now comprises over 200 stores, an annual system turn over of more than $150 million and an estimated market share of 10-12% of retail chicken consumption.

BSPE invested in Lenard's in order to fund the purchase of master franchise licenses of the Lenard's business in Victoria and South Australia, completing a nationwide buyback of all Master Franchise Licenses.

This structural change allowed Lenard's to purchase back existing royalty streams and allowed Lenard's to achieve direct 'line of sight' to their franchisees, more aggressively roll-out expansion plans across the network, and improve delivery of marketing and product initiatives.

GROWTH OPPORTUNITIES 

Expanding the Franchise Network
Lenard's continues to grow the franchise network, with new store openings and low levels of franchisee churn. In addition, Lenard's has signed an agreement with Metcash, which will result in a significant number of 'stores-in-stores' in the IGA network.
Pre-packaged Branded Food
Lenard's is exploring opportunities to distribute branded, packaged Lenard's food across the entire IGA network. A successful roll-out would form a platform to expand overseas into other supermarket chains,
Increased Profitability
There is significant EBIT upside potential through increasing franchise fees to industry benchmarks and increasing supplier rebates.

IMPORTANT NOTE
This Fact Sheet (the 'Fact Sheet') is not an offer or solicitation with respect to the purchase or sale of any investment. While BSPE believe that this material is correct, no warranty of accuracy, reliability or completeness is given and, except for liability under statute which cannot be excluded, no liability for errors or omissions is accepted. This Fact Sheet is for discussion purposes only and is being made available to you to provide summary information regarding Blue Sky Funds Management Pty Ltd and Blue Sky Private Equity Pty Ltd. You should not construe the contents of the Fact Sheet as legal, tax, investment or other advice.


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