Barclays buys the Mill as spin-out nears

Barclays Private Equity, currently in the process of disentangling itself from its UK banking parent, has become the latest private equity owner of special effects group The Mill

Barclays Private Equity has acquired London-headquartered special effects house the Mill from US alternatives manager Carlyle Group for £119 million. The deal featured equity from BPE and management and senior debt only, in a ‘typical’ split, according to a source close to the process.

It becomes the third buyout firm in a row to own the company, which Carlyle acquired from UK-listed 3i Group in 2007 for an undisclosed sum.

The deal comes as BPE is understood to be approaching a first close for its next fund, which is targeting €1.5bn in commitments. The buyout group will spin out from investment banking parent Barclays Capital once the first close – which allows the manager to begin investing capital – is announced, a source with knowledge of the process said. This could happen in the next few weeks, the source indicated. BPE declined to comment on the spin-out or fundraising processes.

Steven Silvester, a director at BPE who worked on the acquisition of the Mill, addressed questions over what more his firm could do with the business that 3i Group and Carlyle Group had failed to achieve, saying: “Businesses go through phases. The Mill has had some very interesting shareholders and owners over the last 20 years. We looked at the company and thought its business plan was attractive. There is still a lot of potential there – it’s an exciting company in a dynamic and growing sector.

“There are some very interesting opportunities in terms of geographic expansion. There will be an office move in Los Angeles soon to give the team there more room, which will require a small amount of capital expenditure, and there’s also the recent joint venture in Singapore to think about. Management is also considering further expansion in the Far East and South America.”

In the year to 31 December 2010, the company generated revenues of £74.2 million, according to a company statement.

Robert Easton, managing director and co-head of Carlyle Europe Technology Partners, said: “The Mill has proved to be an excellent investment for Carlyle, having delivered strong growth and robust performance even through challenging economic times. We congratulate Robin and his team for their extraordinary achievements over the past four years, in which time revenues have almost doubled and headcount has increased by 150%.”

Carlyle declined to comment on the return it had booked following the sale. Harris Williams & Company, a US and London-based boutique, ran the sale process. Debt financing for the transaction was provided by Lloyds Bank Corporate Markets Acquisition Finance, Bank of Ireland, and GE Capital.