Candover brings an end to Stork saga(2)

Candover has agreed to pay €1.5 billion to buy Stork, a Dutch industrial conglomerate that has been involved in a long-running battle over strategy with the two hedge funds that are its biggest shareholders.

UK buyout firm Candover has brought an end to the long-running battle over Stork, a Dutch industrial conglomerate, after agreeing to pay about €1.5 billion ($2.0 billion) for the business.

Candover said it intends to offer €47 per share for Stork, valuing the business at €1.5 billion – a multiple of about 10 times its 2006 earnings, and a 19 percent premium on the average share price in the three months before the negotiations were revealed.

The company’s two biggest shareholders, hedge funds Centaurus and Paulson, who have been battling with the board for almost a year to break up the business into its constituent parts, have both agreed to sell their combined 33 percent stake. The supervisory board has also unanimously recommended the offer

Jan Kalff, chairman of the supervisory board, said Candover had agreed to structure the leverage structure “in such a way that it provides the financial flexibility needed during this growth phase of the company.”

Stork said this made Candover the most attractive bidder, in addition to its “strong track record in the industrial sector” and its support for the strategy of the current management team – which will remain in place.

Under the terms of the deal, Candover will support the existing strategy of selling off the prints division, while continuing to operate the three remaining divisions – aerospace, food systems and technical services – as autonomous units. The two hedge funds had been encouraging the board to sell off all but the aerospace unit, arguing that there were virtually no synergies between the three divisions.

The Works Council, which represents Stork’s workforce, has expressed cautious support for the deal, calling it “a good step” – although it will reserve judgement until it has examined all the relevant aspects. Candover said there would be “no direct negative consequences for the existing employment level” as a result of its offer.

As a result of the deal, the third-party enquiry that the hedge funds had instigated into Stork’s strategy has been terminated with immediate effect.

The deal appears to provide a happy ending to a long-running saga for Stork’s management and shareholders. The company tried to sell itself to private equity last year but failed to attract a suitable offer, and has since been embroiled in a long-running dispute with Centaurus and Paulson.

This is the eighth deal from Candover’s €3.5 billion 2005 fund, and the firm’s largest solo deal to date.