3i books 2.9x on LHi exit

The sale values the Chinese medical company at around $195 million

London-listed 3i Group has sold LHi Technology to US manufacturing company Carlisle Companies in a deal valued at around $195 million (€155 million; $120 million), netting the firm a 2.9x return on its original investment.

LHi, which operates from a manufacturing base in Shenzhen in China, designs, manufactures and provides cables and related components to the medical equipment and device industry. 3i completed a secondary buyout of the business in April 2008 in a deal valuing the company at €72 million ($90 million; £56 million), according to the firm’s website.

3i Group originally invested £16 million ($26 million; €21 million) from its balance sheet in the company. Proceeds to 3i Group from the transaction, excluding amounts held in escrow, will be around £39 million, representing an 18 percent premium over the £33 million its stake was valued at on 31 March 2014.

3i also invested in the company from Euro Fund V, a 2006-vintage €5 billion vehicle. The proceeds for the sale for both 3i Group and Fund V totalled €92 million, representing a 2.8x return in euro terms. 3i Group committed 55 percent of the capital in Fund V, with external LPs constituting the remaining 45 percent.

Euro Fund V, 3i’s latest vehicle, was granted a one-year extension to run until the end of 2012. As of March 2014 the fund was around 90 percent invested, according to a 3i spokesperson.

3i said that during the last six years, LHi has developed from a business focused predominantly on patient monitoring into one that offers more technically demanding and higher performance products, such as cables for surgical and video endoscopy applications. 3i also installed Alberto Bautista as chairman and brought in Scott Hayden as CEO who, according to his LinkedIn page, previously worked as sales director at American Biosurgical.

The firm implemented several operational improvements, increasing the company’s technical capabilities and optimising key costs. During the investment period LHi’s EBITDA almost doubled, while revenues tripled from $31 million to more than $100 million, 3i said.

In May, 3i sold automotive engine and transmission component supplier Hilite International to AVIC Electromechanical Systems, a subsidiary of the Aviation Industry Corporation of China, netting a 2.1x return on its original investment. Proceeds to 31 from the transaction were £155 million, a 17 percent premium over the £133 million the stake was valued at on 31 March 2014.

In its annual report, dated 31 March 2014, 3i Group said it had delivered total cash proceeds of £669 million from private equity realisations, generating realised profits of £201 million, equal to a 1.8x multiple over original costs.

3i shares were down 1.64 percent at 377.0 pence per share Wednesday afternoon, giving the firm a market cap of £3.67 billion.