3i leads SR Technics MBO

The UK private equity firm has acquired the aircraft maintenance unit of the failed Swiss flag carrier in a E425m transaction.

3i and STAR Capital Partners, a UK investor in capital asset-based businesses, have backed a management buyout of SR Technics, the aircraft maintenance unit of SAirGroup, the Swiss airliner currently in administration after going bankrupt earlier this year.


The transaction, valued at E425m, is the largest MBO in the transport and logistics sector in 2002. SR’s management team have taken a twelve per cent stake. 3i has taken a majority stake in the business.


SR Technics currently employs a workforce of 2,900 and expects a turnover of E750m in 2002. The business operates in a sector with little independent provision for maintenance services. Air France and Lufthansa offer third party aircraft maintenance although both give priority to their own respective fleets.


Both 3i and STAR Capital see the acquisition of SR Technics as a means of leading consolidation in the sector. “The aviation industry has suffered from overcapitalisation in the past and the next phase for the sector is consolidation,” believes Tony Mallin, CEO of STAR Capital. “As the only independent outsourcing business of its type, SR Technics is in a very good position to have a major role as major carriers look to outsource their capital.”


Financing for the deal was arranged by ICG, which co-ordinanated a E96m mezzanine facility. HBoS and RBS provided debt financing for the acquisition. AON provided insurance-related due diligence for the buyers.


STAR Capital typically invests in industry sectors such as energy, telecommunications, oil & gas, transportation and industrial plant. The firm closed its first fund on E581m, ahead of the original E500m target. This is the fund’s second investment, following the E120m acquisition of TotalFinaElf Connect and TotalFinaElf Pipelines in August 2001.  


The aviation sector has been a successful area for 3i in the past eighteen months. In May, the firm sold the Go airline business to EasyJet, recouping £374m against an initial purchase price of £110m. David Osborne, 3i director said the investment reflected ‘a willingness to make continued investment in the aviation market as well as to buyout transactions’.