Apax seals its second biggest US deal

The purchase of medical device company Kinetic Concepts is Apax Partners' second biggest US buyout to date, and takes the value of its North American deals this year past $9bn.

Apax Partners has signed its second biggest deal to date in the US, acquiring medical device company Kinetic Concepts for approximately $6.3 billion, including outstanding debt.

The firm's biggest US deal remains its 2007 acquisition of the higher education, careers and library reference assets of Thomson Learning and Nelson Canada from The Thomson Corporation for $7.75 billion.

Two of Apax's limited partners, the Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, co-invested alongside the firm. A spokesman for Apax said CPPIB and PSPIB had taken an active role in the deal process, from due diligence to final offer, making it more of a formal consortium deal than a traditional LP co-investment.

Apax’s investment comes from its Apax Europe VII and Apax US VII funds. The deal takes Apax's €11.2 billion Europe Fund VII well past 70 percent invested, according to a source close to the firm. It has recently launched fundraising for its next buyout fund, according to an investor source, with private placement memoranda dispatched to LPs as it targets at least €9 billion.

The Kinetic deal is the latest in a slew of North American investments by the firm. In April, it announced plans to take private US-listed software group Epicor and acquire peer Activant Solutions from a group of private equity investors in a combined deal worth about $2 billion. A month earlier, it acquired Canadian publishing company Trader Corporation for $745 million, while it made an investment in outsourcing business iGate Corporation through its portfolio company Viscaria in January. The combined value of its North American deals this year is in excess of $9 billion.

Kinetic Concepts focuses on the wound care, tissue regeneration and therapeutic support system markets. In 2010, the company reported revenues of $2 billion.

“We have reviewed multiple investments in the medical devices and products industry, having originally identified it as a key growth sector within our overall healthcare investment practice,” partner and co-head of Apax’s healthcare team Buddy Gumina said in a statement.

Morgan Stanley is acting as financial adviser to the consortium. Morgan Stanley, Bank of America Merrill Lynch and Credit Suisse are providing debt financing for the deal.

CPPIB, which last month teamed up with Allianz Capital Partners and the Abu Dhabi Investment Authority in a $3.2 billion deal for gas transportation business Gassled, saw the return for its private equity portfolio increase by 40 percent over its last fiscal year. The overall value of the Canada Pension Plan grew to C$148.2 billion (€103.4 billion; $152.8 billion) from $127.6 billion in 2010, CPPIB said as it announced its fiscal year end performance to 31 March.