Apax achieves massive return on €3bn Mölnlycke sale

Apax Partners has enjoyed a return of more than ten times its investment after selling Swedish healthcare business Mölnlycke to Investor and Morgan Stanley.

Investor, the quoted investment business of the Swedish Wallenberg family, has teamed up with Morgan Stanley’s principal investment arm to buy Mölnlycke, a Swedish healthcare business, from Apax Partners for €2.85 billion ($3.68 billion).

Apax, which only bought the business eighteen months ago, is set to realise a substantial return of more than 10 times its original investment, according to a banking source.

In 2003, the UK-based buyout firm decided that Mölnlycke would be a strong fit with the two equivalent divisions of medical products business SSL International. It bought the two divisions from SSL a year later and subsequently merged them with Mölnlycke after winning the business at auction in June 2005.

Investor and Morgan Stanley fought off competition from The Blackstone Group and other buyout rivals to win the auction for Mölnlycke, which makes surgical products and wound dressings and had revenues of €760 million in 2006.

The price represents a 12 times multiple of Mölnlycke’s 2006 earnings before income tax, depreciation and amortisation of about €230 million. Investor and Morgan Stanley will take an equal share in Mölnlycke, although the former is contributing a slightly higher proportion of the financing in shareholder loan notes for the deal.

Apax, which was advised by Deutsche Bank, was favouring a flotation of the business until this week, when a number of bidders emerged.

Mölnlycke will now enter its third period of private equity ownership. Swedish buyout firm Nordic Capital established the company in 1997 when it bought and merged the clinical divisions of the SCA/ Mölnlycke Group in Sweden and Tamro in Finland.

Investor has invested in healthcare before. It also owns Gambro, the Swedish medical technology business, and is one of the largest shareholders in pharmaceutical giant AstraZeneca.