Capital Safety, a company that makes harnesses and other equipment to protect workers from falling, may once again prove to be a money maker for its private equity owners – this time for the re-incarnation of what once was one of Europe’s most powerful buyout houses.
Arle Capital Partners, which was formed after executives at Candover Partners bought out the firm from parent Candover Investments earlier this year, has agreed to sell Capital Safety to Kohlberg Kravis Roberts for $1.12 billion. The deal is expected to close in January 2012.
Arle, in its former iteration as Candover Partners, acquired the company for $565 million from Electra Private Equity in 2007. At the time, Electra said it had made 5x times its original investment on the sale, with an internal rate of return of 23 percent. The firm had held the company for nine years and continued to hang on to a 10 percent stake in the company. Electra announced Tuesday it had agreed to exit its remaining stake in the company and expects to receive proceeds of £54 million.
Arle said in a statement that it had reaped a 2.7x return on the original investment.
While the company has experienced growth over the past few years, doubling its revenue since 2007 according to Arle, it has also had four chief executive officers in five years, according to a company spokesperson, and faced the uncertainty of its private equity sponsor failing. The current CEO, Anders Pettersson, has been at the head role since April 2010.
Arle was not available as of press time.
Arle has had some recent exits in its former role as Candover, which sold business administration company Equity Trust to Doughty Hanson in September 2010 for €350 million. Candover also sold Belgian diaper maker Ontex to TPG and Goldman Sachs for €1.2 billion last year. Arle said the three exits have generated proceeds of €728 million.
Financing for the KKR transaction is being provided by UBS, Morgan Stanley and KKR Capital Markets. KKR Capital Markets also is arranging senior unsecured financing with Crescent Capital.
The investment represents KKR’s first foray into the world of safety equipment. The firm believes the company is positioned for growth, especially in terms of its end market, which will center on energy and infrastructure-related employees, as opposed to more traditional end users of safety equipment in the manufacturing universe.
The company also has potential to grow its customer base in emerging markets in Asia and Latin America, as those areas expand their worker safety regulations, according to Pete Stavros, a director in KKR’s industrials group.
“Compliance rates continue to go up; new regulations continue to be put into place,” he said. “In the US, insurance companies pay out some $5 billion in claims every year related to falls from height. The entire size of the fall protection equipment industry in the US is $400 million. So there’s clearly a long way to go, even in the US. You go beyond the US to places in Asia and Latin America, and it gets even more exciting.”
KKR has plans to expand the company in to Brazil, Stavros said.
The investment comes out of KKR’s 2006 fund, which closed on $17.6 billion. The firm has yet to hold a close on its 11th North American fund, which launched earlier this year targeting between $8 billion and $10 billion, though the firm’s head of global capital and asset management group said during the third quarter earnings call KKR had a “direct line of sight to a sizable first close”.
Bloomberg previously reported that KKR had collect at least $4 billion for the fund. Its two most loyal limited partners, the state pension systems of Washington State and Oregon, kicked in more than $1 billion earlier this year.