MIDAS SHARE TIPS UPDATE: Private fairness might be good for enterprise

When the Prince and Princess of Wales sent George and Charlotte to Thomas’s Battersea, they were not just thinking about the prep school’s academic standards but also its emphasis on kindness, courtesy and creativity.

Initially a kindergarten in a church hall, Thomas’s was founded more than 50 years ago by Joanna and David Thomas. With a growing cluster of schools, the group is now run by the Thomases’ sons, who recently decided to sell a minority stake to private equity firm Oakley Capital.

Private equity has a bad name, accused of bleeding companies dry, firing employees and making millions from others’ misfortunes. Oakley strives to be different, focusing on helping companies to grow, working with management and taking a conservative approach to debt.

Last year, the 28 companies in Oakley’s portfolio added 1,000 employees and this year should see more of the same. The group is known for working with founders, often family-run enterprises which are keen to move to the next level but need outside support.

Founded by Peter Dubens, himself a feisty entrepreneur, Oakley has worked with around 30 founders over the years, many of whom continue to put their money into the firm. Two new investments were added to the list only last month – France-based ProductLife, a healthcare consultancy, and Germany’s Vitroconnect, a broadband business founded by 40-something go-getter Dirk Pasternack. 

Investment: The Waleses at Thomas’s Battersea school

Little more than 7 per cent of German households benefit from fast, fibre-based broadband, one of the lowest rates in Europe. But rapid change is planned over the next decade and Vitroconnect is a key player in the process.

Oakley Capital intends to help both businesses expand. The company has form in the tech and healthcare sectors, with several successful deals in the UK and overseas. Importantly too, Pasternack’s decision to team up with Oakley underlines the affinity that founders feel with this business.

Another brace of investments have been made this year. Barcelona-based Horizons Optical provides software to make top-tier, progressive spectacle lenses. Steer Automotive is the UK’s largest independent car repair group. Founded just five years ago by Richard Steer, the company has created a network of more than 100 sites and employs 2,300 staff. But there are around 3,500 car workshops in the UK, Steer is on the acquisition trail and Oakley will provide support and advice along the way.

Oakley shares have risen 18 per cent since Midas recommended them two years ago but, at £4.90, they remain a bargain. According to independent analysis, the group’s investments are valued at £6.93 a share, nearly 30 per cent ahead of their stock market price.

The discrepancy reflects widespread scepticism about private equity firms, accused of imposing overly optimistic valuations on their assets. In Oakley’s case, however, the opposite is true, with the group selling its investments for an average of 50 per cent more than they are valued on the books.

Midas verdict: At £4.90, Oakley Capital shares have delivered returns for investors who bought in 2022, but there is more to come. An attractive stock for new and existing shareholders.

Traded on: Main market Ticker: OCI Contact: oakleycapitalinvestments.com or 020 7766 6900