3i to choose buyer for science asset

Legal & General Ventures, Barclays Private Equity and HgCapital have submitted separate bids of up to £80m for LGC, the former government science institution.

LGC, an independent, science-based service company providing chemical, biochemical and DNA based analysis to the UK government, has been put up for sale by 3i, the venture capital provider.

 

3i backed a management buyout of the business in 1996 when the government agency was privatised. LGC was founded over 150 years ago as the Laboratory of the Government Chemist. Despite being privatised seven years ago, LGC retains its statutory role as Government Chemist.

 

LGC carries out services ranging from DNA paternity tests to drink-driving analysis and food safety checks. Its technology includes the capability to discover evidence of cocaine and heroin use from hair samples. LGC’s clients range from police and coroners to companies such as BP and ICI.

 

Since being privatised, LGC has expanded its activities, increasing staff levels from 250 to more than 600 in 2002. The business, which has reported growth of between 15 and 20 per cent per year over the last three years, achieved EBIT of £5.5m in 2002 on turnover of £41m.

 

HgCapital, Barclays Private Equity and Legal & General Ventures have been shortlisted as potential suitors for the business, according to The Times newspaper, with valuations of the business expected to reach £80m.

 

At the time of the original buyout in 1996, LGC was valued at £5m, although the past seven years has seen a series of acquisitions. Last month, the business set up its first research laboratory outside the UK, acquiring Germany-based Mikromol.

 

3i is expected to choose a successful bidder for the bidder over the coming weeks. Deloitte & Touche is coordinating the sale on behalf of LGC and 3i.

 

3i declined to comment.

 

Last month, British Home Secretary David Blunkett announced that several state-owned research agencies would be turned into government-owned companies, prior to a stake being sold to private companies. As part of these plans, Forensic Science Service (FSS), the agency which analyses forensic samples for the police is to be part-privatised. A number of private equity firms have also been linked with FSS, according to press reports, including Legal & General Ventures and HgCapital.

 

In late 2002, The Carlyle Group agreed to pay £150m for a 33.8 per cent stake in Qinetiq, the scientific research agency owned by the UK Ministry of Defence.